-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WjvauiIh+02d8lr9S8Nkm1lNaUS8X2dr2/nU6EKb0Nx5YmaUELpvYx+ND+fobmLy XgLyPK9KFxmTlg+A7ca2UA== 0000819118-97-000025.txt : 19970813 0000819118-97-000025.hdr.sgml : 19970813 ACCESSION NUMBER: 0000819118-97-000025 CONFORMED SUBMISSION TYPE: PRE 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19971119 FILED AS OF DATE: 19970812 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIDELITY GOVERNMENT SECURITIES FUND CENTRAL INDEX KEY: 0000276773 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 242663446 STATE OF INCORPORATION: MA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: PRE 14A SEC ACT: 1934 Act SEC FILE NUMBER: 811-02869 FILM NUMBER: 97656367 BUSINESS ADDRESS: STREET 1: 82 DEVONSHIRE ST CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 6174391218 MAIL ADDRESS: STREET 1: 82 DEVONSHIRE STREET STREET 2: MAIL ZONE ZH1 CITY: BOSTON STATE: MA ZIP: 02119 PRE 14A 1 SCHEDULE 14A INFORMATION PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934 Filed by the Registrant [X] Filed by a Party other than the Registrant [ ] Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) [ ] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
(Name of Registrant as Specified In Its Charter) Fidelity Government Securities Fund (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Arthur S. Loring, Secretary Payment of Filing Fee (Check the appropriate box): [X] No fee required. [ ]Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. (1) Title of each class of securities to which transaction applies: (2) Aggregate number of securities to which transaction applies: (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11: (4) Proposed maximum aggregate value of transaction: (5) Total Fee Paid:
[ ] Fee paid previously with preliminary materials. [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a) (2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: (2) Form, Schedule or Registration Statement No.: (3) Filing Party: (4) Date Filed: FIDELITY GOVERNMENT SECURITIES FUND 82 DEVONSHIRE STREET, BOSTON, MASSACHUSETTS 02109 1-800-544-8888 NOTICE OF SPECIAL MEETING OF SHAREHOLDERS To the Shareholders of FIDELITY GOVERNMENT SECURITIES FUND: NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the Meeting) of Fidelity Government Securities Fund (the fund), a series of Fidelity Government Securities Fund, a single series trust (the trust), will be held at the office of the trust, 82 Devonshire Street, Boston, Massachusetts 02109 on November 19, 1997, at 1:15 p.m. The purpose of the Meeting is to consider and act upon the following proposals, and to transact such other business as may properly come before the Meeting or any adjournments thereof. 1. To approve an amended management contract for the fund. 2. To approve an Agreement and Plan providing for the reorganization of the fund from a separate series of one Massachusetts business trust to another. 3. To eliminate the fund's fundamental investment policy which limits its security investments to U.S. Government securities whose interest is exempt from state and local income tax. 4. To amend the fund's fundamental investment limitation concerning real estate. 5. To adopt a new fundamental investment policy for the fund permitting the fund to invest all of its assets in another open-end investment company with substantially the same investment objective and policies. ADOPTION OF STANDARDIZED INVESTMENT LIMITATIONS 6. To amend the fund's fundamental investment limitation concerning the issuance of senior securities. 7. To eliminate the fund's fundamental investment limitation concerning short sales of securities. 8. To eliminate the fund's fundamental investment limitation concerning margin purchases. 9. To amend the fund's fundamental investment limitation concerning borrowing. 10. To amend the fund's fundamental investment limitation concerning underwriting. 11. To amend the fund's fundamental investment limitation concerning the concentration of its investments in a single industry. 12. To eliminate the fund's fundamental investment limitation concerning investments in other investment companies. 13.To eliminate the fund's fundamental investment limitation concerning investing in oil, gas, or other mineral exploration or development programs. 14. To eliminate the fund's fundamental investment limitation concerning purchasing warrants. The Board of Trustees has fixed the close of business on September 22, 1997 as the record date for the determination of the shareholders of the fund entitled to notice of, and to vote at, such Meeting and any adjournments thereof. By order of the Board of Trustees, ARTHUR S. LORING, Secretary September 22, 1997 YOUR VOTE IS IMPORTANT - PLEASE RETURN YOUR PROXY CARD PROMPTLY. SHAREHOLDERS ARE INVITED TO ATTEND THE MEETING IN PERSON. ANY SHAREHOLDER WHO DOES NOT EXPECT TO ATTEND THE MEETING IS URGED TO INDICATE VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD, DATE AND SIGN IT, AND RETURN IT IN THE ENVELOPE PROVIDED, WHICH NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES. IN ORDER TO AVOID UNNECESSARY EXPENSE, WE ASK YOUR COOPERATION IN MAILING YOUR PROXY CARD PROMPTLY, NO MATTER HOW LARGE OR SMALL YOUR HOLDINGS MAY BE. INSTRUCTIONS FOR EXECUTING PROXY CARD The following general rules for executing proxy cards may be of assistance to you and help avoid the time and expense involved in validating your vote if you fail to execute your proxy card properly. 1. INDIVIDUAL ACCOUNTS: Your name should be signed exactly as it appears in the registration on the proxy card. 2. JOINT ACCOUNTS: Either party may sign, but the name of the party signing should conform exactly to a name shown in the registration. 3. ALL OTHER ACCOUNTS should show the capacity of the individual signing. This can be shown either in the form of the account registration itself or by the individual executing the proxy card. For example: REGISTRATION VALID SIGNATURE A. 1) ABC Corp. John Smith, Treasurer 2) ABC Corp. John Smith, Treasurer c/o John Smith, Treasurer B. 1) ABC Corp. Profit Sharing Plan Ann B. Collins, Trustee 2) ABC Trust Ann B. Collins, Trustee 3) Ann B. Collins, Trustee Ann B. Collins, Trustee u/t/d 12/28/78 C. 1) Anthony B. Craft, Cust. Anthony B. Craft f/b/o Anthony B. Craft, Jr. UGMA PROXY STATEMENT SPECIAL MEETING OF SHAREHOLDERS OF FIDELITY GOVERNMENT SECURITIES FUND a series of FIDELITY GOVERNMENT SECURITIES FUND TO BE HELD ON NOVEMBER 19, 1997 This Proxy Statement is furnished in connection with a solicitation of proxies made by, and on behalf of, the Board of Trustees of Fidelity Government Securities Fund, a single series trust, (the trust) to be used at the Special Meeting of Shareholders of Fidelity Government Securities Fund (the fund) and at any adjournments thereof (the Meeting), to be held on November 19, 1997 at 1:15 p.m. at 82 Devonshire Street, Boston, Massachusetts 02109, the principal executive office of the trust and Fidelity Management & Research Company (FMR), the fund's investment adviser. The purpose of the Meeting is set forth in the accompanying Notice. The solicitation is made primarily by the mailing of this Proxy Statement and the accompanying proxy card on or about September 22, 1997. Supplementary solicitations may be made by mail, telephone, telegraph, facsimile, or by personal interview by representatives of the trust. In addition, Management Information Services Corp. (MIS) and D.F. King & Co. Inc. may be paid on a per-call basis to solicit shareholders on behalf of the fund at an anticipated cost of approximately $_____. The expenses in connection with preparing this Proxy Statement and its enclosures and of all solicitations will be paid by the fund. The fund will reimburse brokerage firms and others for their reasonable expenses in forwarding solicitation material to the beneficial owners of shares. The principal business address of Fidelity Distributors Corporation, the fund's principal underwriter and distribution agent, is 82 Devonshire Street, Boston, Massachusetts 02109. If the enclosed proxy card is executed and returned, it may nevertheless be revoked at any time prior to its use by written notification received by the trust, by the execution of a later-dated proxy card, or by attending the Meeting and voting in person. All proxy cards solicited by the Board of Trustees that are properly executed and received by the Secretary prior to the Meeting, and which are not revoked, will be voted at the Meeting. Shares represented by such proxies will be voted in accordance with the instructions thereon. If no specification is made on a proxy card, it will be voted FOR the matters specified on the proxy card. Only proxies that are voted will be counted towards establishing a quorum. Broker non-votes are not considered voted for this purpose. Shareholders should note that while votes to ABSTAIN will count toward establishing a quorum, passage of any proposal being considered at the Meeting will occur only if a sufficient number of votes are cast FOR the proposal. Accordingly, votes to ABSTAIN and votes AGAINST will have the same effect in determining whether the proposal is approved. The fund may also arrange to have votes recorded by telephone. D.F. King & Co. Inc. may be paid on a per call basis for vote-by-phone solicitations on behalf of the fund at an anticipated cost of approximately $_____. The expenses in connection with telephone voting will be paid by the fund. If the fund records votes by telephone, it will use procedures designed to authenticate shareholders' identities, to allow shareholders to authorize the voting of their shares in accordance with their instructions, and to confirm that their instructions have been properly recorded. Proxies voted by telephone may be revoked at any time before they are voted in the same manner that proxies voted by mail may be revoked. If a quorum is not present at the Meeting, or if a quorum is present at the Meeting, but sufficient votes to approve one or more of the proposed items are not received, or if other matters arise requiring shareholder attention, the persons named as proxies may propose one or more adjournments of the Meeting to permit further solicitation of proxies. Any such adjournment will require the affirmative vote of a majority of those shares present at the Meeting or represented by proxy. When voting on a proposed adjournment, the persons named as proxies will vote FOR the proposed adjournment all shares that they are entitled to vote with respect to each item, unless directed to vote AGAINST the item, in which case such shares will be voted AGAINST the proposed adjournment with respect to that item. A shareholder vote may be taken on one or more of the items in this Proxy Statement prior to such adjournment if sufficient votes have been received and it is otherwise appropriate. On July 31, 1997, there were ________ shares of the fund issued and outstanding. To the knowledge of the Trust, [no shareholder owned of record or beneficially more than 5% of the outstanding voting shares of the fund.]/[substantial (5% or more) record ownership of the fund on July 31, 1997 was as follows: ______ (__%). To the knowledge of the trust, no other shareholder owned of record or beneficially more than 5% of the outstanding shares of each fund on that date. Shareholders of record at the close of business on September 22, 1997 will be entitled to vote at the Meeting. Each such shareholder will be entitled to one vote for each share held on that date. FOR A FREE COPY OF THE FUND'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996 AND THE SEMIANNUAL REPORT FOR THE FISCAL PERIOD ENDING MARCH 31, 1997, CALL 1-800-544-8888 OR WRITE TO FIDELITY DISTRIBUTORS CORPORATION AT 82 DEVONSHIRE STREET, BOSTON, MASSACHUSETTS 02109. VOTE REQUIRED: APPROVAL OF PROPOSALS 1 THROUGH 14 REQUIRES THE AFFIRMATIVE VOTE OF A "MAJORITY OF THE OUTSTANDING VOTING SECURITIES" OF THE FUND. UNDER THE INVESTMENT COMPANY ACT OF 1940 (THE 1940 ACT), THE VOTE OF A "MAJORITY OF THE OUTSTANDING VOTING SECURITIES" MEANS THE AFFIRMATIVE VOTE OF THE LESSER OF (A) 67% OR MORE OF THE VOTING SECURITIES PRESENT AT THE MEETING OR REPRESENTED BY PROXY IF THE HOLDERS OF MORE THAN 50% OF THE OUTSTANDING VOTING SECURITIES ARE PRESENT OR REPRESENTED BY PROXY OR (B) MORE THAN 50% OF THE OUTSTANDING VOTING SECURITIES. BROKER NON-VOTES ARE NOT CONSIDERED "PRESENT" FOR THIS PURPOSE. 1. TO APPROVE AN AMENDED MANAGEMENT CONTRACT FOR THE FUND. The Board of Trustees, including the Trustees who are not "interested persons" of the Trust or of FMR (the Independent Trustees), has approved, and recommends that shareholders of the fund approve a proposal to adopt an amended management contract with Fidelity Management & Research Company (FMR) (the Amended Contract). The Amended Contract modifies the management fee that FMR receives from the fund to provide for lower fees when FMR's assets under management exceed certain levels. The Amended Contract also includes a discussion of FMR's ability to use brokers and dealers to execute portfolio transactions. THE AMENDED CONTRACT WILL RESULT IN A MANAGEMENT FEE THAT IS THE SAME AS, OR LOWER THAN, THE FEE PAYABLE UNDER THE PRESENT MANAGEMENT CONTRACT (THE PRESENT CONTRACT). (For information on FMR, see the section entitled "Activities and Management of FMR" on page __.) PROPOSED AMENDMENTS TO THE PRESENT MANAGEMENT CONTRACT. A copy of the Amended Contract, marked to indicate the proposed amendments, is supplied as Exhibit 1 on page __ . Except for the modifications discussed above, it is substantially identical to the Present Contract. (For a detailed discussion of the fund's Present Contract, refer to the section entitled "Present Management Contract" beginning on page __.) If approved by shareholders, the Amended Contract will take effect on December 1, 1997 (or, if later, the first day of the month following approval) and will remain in effect through June 30, 1998 and thereafter, but only as long as its continuance is approved at least annually by (i) the vote, cast in person at a meeting called for the purpose, of a majority of those Trustees who are not "interested persons" of the trust or FMR (the Independent Trustees) and (ii) the vote of either a majority of the Trustees or by the vote of a majority of the outstanding shares of the fund. If the Amended Contract is not approved, the Present Contract will continue in effect through June 30, 1998, and thereafter only as long as its continuance is approved at least annually by (i) the vote, cast in person at a meeting called for the purpose, of a majority of the Independent Trustees and (ii) the vote of either a majority of the Trustees or by the vote of a majority of the outstanding shares of the fund. The management fee is an annual percentage of the fund's average net assets (the management fee rate), calculated and paid monthly. The management fee rate is the sum of two components: a Group Fee Rate, which varies according to assets under management by FMR, and a fixed Individual Fund Fee Rate. The Amended Contract modifies the Group Fee Rate by providing for lower fee rates if FMR's assets under management remain above $120 billion. MODIFICATION TO GROUP FEE RATE. The Group Fee Rate varies based upon the monthly average of the aggregate net assets of all registered investment companies having management contracts with FMR (assets under management by FMR). For example, as assets under management by FMR increase, the Group Fee Rate declines. The Amended Contract would not change the group fee calculation for assets under management by FMR of $120 billion or less. Above $120 billion in assets under FMR's management, the Group Fee Rate declines under both the Present Contract and the Amended Contact, but under the Amended Contract, it declines faster. Group Fee Rates that are lower than those contained in the fund's Present Contract have been voluntarily implemented by FMR on January 1, 1992, November 1, 1993, August 1, 1994, and January 1, 1996. The Group Fee Rate is calculated according to a graduated schedule providing for different rates for different levels of assets under management by FMR. The rate at which the Group Fee Rate declines is determined by fee "breakpoints" that provide for lower fee rates when assets increase. The Amended Contract adds 12 new fee breakpoints for assets under FMR's management above $120 billion as illustrated in the following table. (For an explanation of how the Group Fee Rate is used to calculate the management fee, see the section entitled "Present Management Contract" beginning on page ___.) GROUP FEE RATE BREAKPOINTS PRESENT CONTRACT AMENDED CONTRACT Average Group Present Average Group Amended Assets Contract* Assets Contract ($ billions) ($ billions) Over 84 .1500% 84 - 120 .1500% 120 - 156 .1450% 156 - 192 .1400% 192 - 228 .1350% 228 - 264 .1300% 264 - 300 .1275% 300 - 336 .1250% 336 - 372 .1225% 372 - 408 .1200% 408 - 444 .1175% 444 - 480 .1150% 480 - 516 .1125% Over 516 .1100% * Does not reflect voluntary adoption of extended group fee rate schedules by FMR on January 1, 1992, November 1, 1993, August 1, 1994, and January 1, 1996. The result at various levels of group net assets is illustrated by the table below. EFFECTIVE GROUP FEE RATES Group Net Present Amended Assets Contract* Contract ($ billions) 150 .1746% .1736% 200 .1685% .1652% 250 .1648% .1587% 300 .1623% .1536% 350 .1605% .1494% 400 .1592% .1459% 450 .1582% .1427% 500 .1574% .1399% 550 .1567% .1372% * Does not reflect voluntary adoption of extended group fee rate schedules by FMR on January 1, 1992, November 1, 1993, August 1, 1994, and January 1, 1996. Assets under FMR's management for July 31,1997 were approximately $522 billion. COMPARISON OF MANAGEMENT FEES. For July 1997, average assets under management by FMR were $522 billion. The fund's management fee rate under the Amended Contract would have been 0.44%, compared to 0.46% under the Present Contract. The management fee rate will remain the same under both the Present Contract and the Amended Contract until assets under FMR's management exceed $120 billion, at which point the management fee rate under the Amended Contract begins to decline relative to the Present Contract. The following chart compares the fund's management fee under the terms of the Present Contract for the period ended July 31, 1997 to the management fee the fund would have incurred if the Amended Contract had been in effect. Present Contract Amended Contract Management Management Percentage Fee* Fee Difference $4,433,395 $4,279,069 (3.5%) * Does not reflect voluntary adoption of extended group fee rate schedules by FMR on January 1, 1992, November 1, 1993, August 1, 1994, and January 1, 1996. TRANSACTIONS WITH BROKERS-DEALERS. The fund may execute portfolio transactions with broker-dealers who provide research and execution services to the fund or other accounts over which FMR or its affiliates exercise investment discretion. The selection of such broker-dealers is generally made by FMR (to the extent possible consistent with execution considerations) in accordance with a ranking of broker-dealers determined periodically by FMR's investment staff based upon the quality of research and execution services provided. If FMR grants investment management authority to a sub-adviser pursuant to a Sub-advisory Agreement, the sub-adviser is authorized to place orders for the purchase and sale of portfolio securities, and will do so in accordance with the policies described below. The receipt of research from broker-dealers that execute transactions on behalf of the fund may be useful to FMR in rendering investment management services to the fund and to its other clients, and conversely, such research provided by broker-dealers who execute transaction orders on behalf of other FMR clients may be useful to FMR in carrying out its obligations to the fund. The receipt of such research has not reduced FMR's normal independent research activities; however, it enables FMR to avoid additional expenses that could be incurred if FMR tried to develop comparable information through its own efforts. Subject to applicable limitations of the federal securities laws, broker-dealers may receive commissions for agency transactions that are in excess of the amount of commissions charged by other broker-dealers in recognition of their research and execution services. In order to cause the fund to pay such higher commissions, FMR must determine in good faith that such commissions are reasonable in relation to the value of the brokerage and research services provided by such executing broker-dealers, viewed in terms of a particular transaction or FMR's overall responsibilities to the fund and its other clients. In reaching this determination, FMR will not attempt to place a specific dollar value on the brokerage and research services provided, or to determine what portion of the compensation should be related to those services. The fund has already been authorized by the Board of Trustees, consistent with the federal securities laws and the rules and regulations of the Securities and Exchange Commission, to place portfolio transactions through broker-dealers who are affiliated with FMR and through broker-dealers who provide research. The Amended Contract expressly recognizes this authority. MATTERS CONSIDERED BY THE BOARD The mutual funds for which the members of the Board of Trustees serve as Trustees are referred to herein as the "Fidelity funds." The Board of Trustees meets eleven times a year. The Board of Trustees, including the Independent Trustees, believe that matters bearing on the appropriateness of the fund's management fees are considered at most, if not all, of their meetings. While the full Board of Trustees or the Independent Trustees, as appropriate, act on all major matters, a significant portion of the activities of the Board of Trustees (including certain of those described herein) are conducted through committees. The Independent Trustees meet frequently in executive session and are advised by independent legal counsel selected by the Independent Trustees. The proposal to present the Amended Contract to shareholders was approved by the Board of Trustees of the fund, including the Independent Trustees on June 19, 1997. The Board of Trustees considered and approved the modifications to the Group Fee Rate schedule during the two-month periods from November to December 1995, June to July 1994, September to October 1993, and November to December 1991. The Board of Trustees consider and approve twice every year portfolio transactions with broker-dealers who provide research services to the funds. The Board of Trustees received materials relating to the Amended Contract in advance of the meeting at which the Amended Contract was considered, and had the opportunity to ask questions and request further information in connection with such consideration. INFORMATION RECEIVED BY THE INDEPENDENT TRUSTEES. In connection with their monthly meetings Trustees receive materials specifically relating to the Amended Contract. These materials include: (i) information on the investment performance of the fund, a peer group of funds and an appropriate index or combination of indices, (ii) sales and redemption data in respect of the fund, (iii) the economic outlook and the general investment outlook in the markets in which the fund invests, and (iv) notable changes in the fund's investments. The Board of Trustees and the Independent Trustees also consider periodically other material facts such as (1) FMR's results and financial condition, (2) arrangements in respect of the distribution of the fund's shares, (3) the procedures employed to determine the value of the fund's assets, (4) the allocation of the fund's brokerage, if any, including allocations to brokers affiliated with FMR, (5) FMR's management of the relationships with the fund's custodian and subcustodians, and (6) the resources devoted to and the record of compliance with the fund's investment policies and restrictions and with policies on personal securities transactions, (7) the nature, cost and quality of non-investment management services provided by FMR and its affiliates. In response to questions raised by the Independent Trustees, additional information was furnished by FMR including, among other items, information on and analysis of (a) the overall organization of FMR, (b) the choice of performance indices and benchmarks, (c) the composition of peer groups of funds, (d) transfer agency and bookkeeping fees paid to affiliates of FMR, (e) investment performance, (f) investment management staffing, (g) the potential for achieving further economies of scale, (h) operating expenses paid to third parties, and (i) the information furnished to investors, including the fund's shareholders. In considering the Amended Contract, the Board of Trustees and the Independent Trustees did not identify any single factor as all-important or controlling, and the following summary does not detail all the matters considered. Matters considered by the Board of Trustees and the Independent Trustees in connection with their approval of the Amended Contract include the following: INVESTMENT COMPLIANCE AND PERFORMANCE. The Board of Trustees and the Independent Trustees considered whether the fund has operated within its investment objective and its record of compliance with its investment restrictions. They also reviewed monthly the fund's investment performance as well as the performance of a peer group of mutual funds, and the performance of an appropriate index or combination of indices. FMR'S PERSONNEL AND METHODS. The Board of Trustees and the Independent Trustees annually review a report detailing the background of the fund's portfolio manager, and the fund's investment objective and discipline. The Independent Trustees have also had discussions with senior management of FMR responsible for investment operations, and the senior management of Fidelity's fixed income group. Among other things they considered the size, education and experience of FMR's investment staff, its use of technology, and FMR's approach to recruiting, training and retaining portfolio managers and other research, advisory and management personnel. NATURE AND QUALITY OF OTHER SERVICES. The Board of Trustees and the Independent Trustees considered the nature, quality, cost and extent of administrative and shareholder services performed by FMR and affiliated companies, both under the Amended Contract and under separate agreements covering transfer agency functions and pricing, bookkeeping and securities lending services, if any. The Board of Trustees and the Independent Trustees have also considered the nature and extent of FMR's supervision of third party service providers, principally custodians and subcustodians. EXPENSES. The Board of Trustees and the Independent Trustees considered the fund's expense ratio and expense ratios of a peer group of funds. They also considered the amount and nature of fees paid by shareholders. PROFITABILITY. The Board of Trustees and the Independent Trustees considered the level of FMR's profits in respect of the management of the Fidelity funds, including the fund. This consideration included an extensive review of FMR's methodology in allocating its costs to the management of the fund. The Board of Trustees and the Independent Trustees have concluded that the cost allocation methodology employed by FMR has a reasonable basis and is appropriate in light of all of the circumstances. They considered the profits realized by FMR in connection with the operation of the fund and whether the amount of profit is a fair entrepreneurial profit for the management of the fund. They also considered the profits realized from non-fund businesses which may benefit from or be related to the fund's business. The Board of Trustees and the Independent Trustees also considered FMR's profit margins in comparison with available industry data, both accounting for and ignoring market expenses. ECONOMIES OF SCALE. The Board of Trustees and the Independent Trustees considered whether there have been economies of scale in respect of the management of the Fidelity funds, whether the Fidelity funds (including the fund) have appropriately benefitted from any economies of scale, and whether there is potential for realization of any further economies of scale. The Board of Trustees and the Independent Trustees have concluded that FMR's mutual fund business presents some limited opportunities to realize economies of scale and that these economies are being shared between fund shareholders and FMR in an appropriate manner. The Independent Trustees have also concluded that the existing group fee structure should be continued but determined that it would be appropriate to change the group fee structure as proposed herein. OTHER BENEFITS TO FMR. The Board of Trustees and the Independent Trustees also considered the character and amount of fees paid by the fund and the fund's shareholders for services provided by FMR and its affiliates, including fees for services like transfer agency, fund accounting and direct shareholder services. They also considered the allocation of fund brokerage to brokers affiliated with FMR and the receipt of sales loads and payments under Rule 12b-1 plans in respect of certain of the Fidelity funds. The Board of Trustees and the Independent Trustees also considered the revenues and profitability of FMR businesses other than its mutual fund business, including FMR's retail brokerage, correspondent brokerage, capital markets, trust, investment advisory, pension record keeping, credit card, insurance, publishing, real estate, international research and investment funds, and others. The Board of Trustees and the Independent Trustees considered the intangible benefits that accrue to FMR and its affiliates by virtue of their relationship with the fund. OTHER BENEFITS TO SHAREHOLDERS. The Board of Trustees and the Independent Trustees considered the benefit to shareholders of investing in a fund that is part of a large family of funds offering a variety of investment disciplines and providing for a large variety of fund and shareholder services. With regard to the section of the proposed contract describing the changes to portfolio transactions, the Trustees considered the value of research provided by the broker-dealers, the quality of the execution services provided, and the level of commissions paid. While the fund does not generally purchase securities through a broker-dealer by paying commissions, the Board of Trustees determined that amending the management contract to expressly recognize the authority of FMR to use affiliated broker-dealers and broker-dealers who provide research services furthers the goal of standardizing management contracts for Fidelity funds, and that explicitly permitting all Fidelity funds to utilize certain broker-dealers is beneficial to the fund. CONCLUSION. Based on their evaluation of all material factors and assisted by the advice of independent counsel, the Trustees concluded (i) that the existing management fee structure is fair and reasonable and (ii) that the proposed modifications to the management fee structure, that is the reduction of the Group Fee Rate schedule and the addition of the discussion of FMR's ability to use brokers and dealers to execute portfolio transactions, are in the best interest of the fund's shareholders. The Board of Trustees, including the Independent Trustees, voted to approve the submission of the Amended Contract to shareholders of the fund and recommends that shareholders of the fund vote FOR the Amended Contract. If approved by shareholders, the Amended Contract will take effect on the first day of the month following approval. 2. TO APPROVE AN AGREEMENT AND PLAN PROVIDING FOR THE REORGA- NIZATION OF THE FUND FROM A SEPARATE SERIES OF ONE MASSACHUSETTS BUSINESS TRUST TO ANOTHER. The Board of Trustees have approved an Agreement and Plan of Reorganization (the Plan of Reorganization) in the form attached to this Proxy Statement as Exhibit 2. The Plan of Reorganization provides for a reorganization of Fidelity Government Securities Fund (the Fund) from a separate series of Fidelity Government Securities Fund (GSF), a Massachusetts business trust, to a newly-established, separate series of Fidelity Income Fund (the Trust), also a Massachusetts business trust (the Reorganization). The investment objective, policies, and limitations of the Fund will not change except as approved by shareholders and as described in this proxy statement. A separate series of the Trust will carry on the business of the Fund following the Reorganization (the Series). The Series, which has not yet commenced business operations, will have an investment objective, policies, and limitations identical to those of the Fund (except as they may be modified pursuant to a vote of the shareholders as proposed in this proxy statement). Since both GSF and the Trust are Massachusetts business trusts, organized under substantially similar Declarations of Trust, the rights of the security holders of the Fund under state law and the governing documents are expected to remain unchanged after the Reorganization except with regard to shareholder voting rights as described below), nor will the Reorganization affect the operation of the Fund in a material manner. The same individuals serve as Trustees of both trusts except that Robert M Gates, William O. McCoy, and Robert C. Pozen serve as Trustees of Fidelity Income Fund. Both trusts are authorized to issue an unlimited number of shares of beneficial interest, and each Declaration of Trust permits the Trustees to create one or more additional series or funds. Shareholder voting rights for the Fund are based on the number of shares owned while shareholder voting rights for the Series will be based on the total dollar interest in the Series. While the differences between the shareholder voting rights would have no bearing on matters affecting only one fund in a trust, on matters requiring trust-wide votes where all funds in a trust are required to vote, dollar-based voting provides shareholder voting power that is proportionate to their economic interest whereas share-based voting may provide shareholders who own shares with a lower net asset value than other funds in the trust with a disproportionate ability to affect the vote relative to shareholders of the other funds in the trust. After the reorganization, the voting rights of Fund shareholders will change to reflect those of the Series. For more information regarding voting rights of shareholders of the Fund, refer to the section of the Fund's Statement of Additional Information called "Description of the Trust." The Trust's fiscal year end is July 31, which is different than that of GSF. The Trustees may change the fiscal year end of the Trust at their discretion in the future. FMR, the Fund's investment adviser, will be responsible for the investment management of the Series, subject to the supervision of the Board of Trustees, under a management contract identical to the contract in effect between FMR and the Fund (the Present Management Contract) except as it may be modified pursuant to a vote of the shareholders of the Fund as proposed in this Proxy Statement. The Fund's distribution agent, FDC, will distribute shares of the Series under a General Distribution Agreement identical to the contract currently in effect between FDC and the Fund. REASON FOR THE PROPOSED REORGANIZATION. The Fund is presently organized as a series of GSF, which has one series of shares or fund. The Board of Trustees unanimously recommend conversion of the Fund to a separate series of the Trust (i.e., into the Series) which will succeed to the business of the Fund. Moving the Fund from GSF to the Trust will consolidate and streamline the production and mailing of certain legal documents. THE PROPOSED CHANGE WILL HAVE NO MATERIAL EFFECT ON SHAREHOLDERS OR THE MANAGEMENT OF THE FUND. However the proposed change would allow FMR to consolidate documents for government bond funds for increased efficiency in producing and mailing certain documents. In addition, a combined Prospectus will enhance the discussion of the Fund by presenting it in the context of a full spectrum of government bond fund choices. The proposal to present the Plan of Reorganization to shareholders was approved by the Board of Trustees of GSF, including all of the Trustees who are not interested persons of FMR, on June 19, 1997. The Board of Trustees recommends that Fund shareholders vote FOR the approval of the Plan of Reorganization described below. Such a vote encompasses approval of the conversion of the Fund to a separate series of the Trust; temporary waiver of certain investment limitations of the Fund to permit the Reorganization (see "Temporary Waiver of Investment Restrictions" on page _); and authorization of GSF, as sole shareholder of the Series, to approve (i) a Management Contract for the Series between the Trust and FMR, and (ii) the Distribution and Service Plan under Rule 12b-1, identical to the contract or Plan, as the case may be, in effect with the Fund immediately prior to the Closing Date (including as the Management Contract may be modified pursuant to a vote of shareholders of the fund as proposed in this Proxy Statement). If shareholders of the Fund do not approve the Plan of Reorganization, the Fund will continue to operate as a series of GSF. SUMMARY OF THE PLAN OF REORGANIZATION. The following discussion summarizes the important terms of the Plan of Reorganization. This summary is qualified in its entirety by reference to the Plan of Reorganization itself, which is attached as Exhibit 2 to this Proxy Statement. On the Closing Date of the Reorganization (defined below), the Fund will transfer all of its assets to the Series, a series of shares of the Trust established for the purpose of effecting the Reorganization, in exchange for the assumption by the Series of all of the liabilities of the Fund and the issuance of shares of beneficial interest in the Series (Trust Series Shares) equal to the number of Fund shares outstanding on the Closing Date. Immediately thereafter, the Fund will distribute one Trust Series Share for each Fund share (the Fund Shares) held by the shareholder on the Closing Date to each Fund shareholder, in liquidation of such Fund Shares. Immediately after this distribution of the Trust Series Shares, the Fund will be terminated and, as soon as practicable thereafter, will be wound up and liquidated. UPON COMPLETION OF THE REORGANIZATION, EACH FUND SHAREHOLDER WILL BE THE OWNER OF FULL AND FRACTIONAL TRUST SERIES SHARES EQUAL IN NUMBER, DENOMINATION, AND AGGREGATE NET ASSET VALUE TO HIS OR HER FUND SHARES. The Plan of Reorganization authorizes GSF as the then sole initial shareholder of the Series to approve (i) a Management Contract with FMR for the Series (the New Management Contract), and (ii) the Distribution and Service Plan (the New Plan) under Rule 12b-1 with respect to the Series, identical to the contract or Plan, as the case may be, in effect with the Fund immediately prior to the Closing Date (including as the Management Contract may be modified pursuant to a vote of shareholders of the fund as proposed in this Proxy Statement). The Trust's Board of Trustees will hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument signed by at least two-thirds of the number of Trustees prior to removal; (c) any Trustee who requests to be retired by written instrument signed by a majority of the other Trustees or who is unable to serve due to physical or mental incapacity by reason of disease or otherwise, death, or for any other reason, may be retired; and (d) a Trustee may be removed at any Special Meeting of the shareholders by a vote of two-thirds of the outstanding shares of the Trust. In case a vacancy shall for any reason exist, the remaining Trustees will fill such vacancy by appointing another Trustee, so long as, immediately after such appointment, at least two-thirds of the Trustees have been elected by shareholders. If, at any time, less than a majority of the Trustees holding office has been elected by shareholders, the Trustees then in office will promptly call a shareholders' meeting for the purpose of electing a Board of Trustees. Otherwise, there will normally be no meeting of shareholders for the purpose of electing Trustees. The New Management Contract and the New Plan will take effect on the Closing Date. The New Management Contract and the New Plan will continue in force until June 30, 1998. Each agreement will continue in force thereafter from year to year so long as its continuance is approved at least annually (i) by the vote of a majority of the Trustees who are not "interested persons" of the Trust, or FMR, cast in person at a meeting called for the purpose of voting on such approval, and (ii) by vote of a majority of the Trustees or by the vote of a majority of the outstanding shares of the Series. The New Plan will continue in effect only if approved annually by a vote of the Trustees and of those Trustees who are not interested persons, cast in person at a meeting called for that purpose. The New Management Contract will be terminable without penalty on sixty days' written notice either by the Trust or FMR, as the case may be, and will terminate automatically in the event of its assignment. The New Plan may be terminable at any time, without the payment of any penalty, by a vote of a majority of the Independent Trustees or by a vote of a majority of the outstanding voting securities of the fund. Assuming the Plan of Reorganization is approved, it is currently contemplated that the Reorganization will become effective at the close of business on November 29, 1997 (the Closing Date). However, the Reorganization may become effective at such later date as the parties may agree in writing. The obligations of GSF and the Trust under the Plan of Reorganization are subject to various conditions as stated therein. Notwithstanding the approval of the Plan of Reorganization by Fund shareholders, the Plan of Reorganization may be terminated or amended at any time prior to the Reorganization by action of the Trustees to provide against unforeseen events, if (1) there is a material breach by the other party of any representation, warranty, or agreement contained in the Plan of Reorganization to be performed at or prior to the Closing Date or (2) it reasonably appears that a party will not or cannot meet a condition of the Plan of Reorganization. Either trust may at any time waive compliance with any of the covenants and conditions contained in, or may amend, the Plan of Reorganization, provided that such waiver or amendment does not materially adversely affect the interests of Fund shareholders. CONTINUATION OF FUND SHAREHOLDER ACCOUNTS AND PLANS. The Trust's transfer agent will establish an account for the Series' shareholders containing the appropriate number and denominations of Trust Series Shares to be received by each holder of Fund Shares under the Plan of Reorganization. Such accounts will be identical in all material respects to the accounts currently maintained by the Fund's transfer agent for the Fund's shareholders. Fund shareholders who are receiving payment under a withdrawal plan with respect to Fund Shares will retain the same rights and privileges as to Trust Series Shares under the Plan of Reorganization. Similarly, no further action will be necessary in order to continue any automatic investment plan or retirement plan currently maintained by a Fund shareholder with respect to Fund Shares. EXPENSES. The Fund and the Series shall each be responsible for all of their respective expenses of the Reorganization, estimated at $______ in the aggregate. TEMPORARY WAIVER OF INVESTMENT RESTRICTIONS. Certain fundamental investment restrictions of the Fund, which prohibit the Fund from acquiring more than a stated percentage of ownership of another company, might be construed as restricting the Fund's ability to carry out the Reorganization. By approving the Plan of Reorganization, Fund shareholders will be agreeing to waive, only for the purpose of the Reorganization, those fundamental investment restrictions that could prohibit or otherwise impede the transaction. TAX CONSEQUENCES OF THE REORGANIZATION. Each trust has received an opinion from their counsel, Kirkpatrick & Lockhart LLP, that the Reorganization will constitute a tax-free reorganization within the meaning of Section 368(a)(1)(F) of the Internal Revenue Code of 1986, as amended. Accordingly, no gain or loss will be recognized for federal income tax purposes by the Fund, the Series, or the Fund's shareholders upon (1) the transfer of the Fund's assets in exchange solely for the Trust Series Shares and the assumption by the Trust on behalf of the Series of the Fund's liabilities or (2) the distribution of Trust Series Shares to the Fund's shareholders in liquidation of their Fund Shares. The opinion further provides, among other things, that (a) the basis for federal income tax purposes of the Trust Series Shares to be received by each Fund shareholder will be the same as that of his or her Fund Shares immediately prior to the Reorganization; and (b) each Fund shareholder's holding period for his or her Trust Series Shares will include the Fund shareholder's holding period for his or her Fund Shares, provided that said Fund Shares were held as capital assets on the date of the exchange. CONCLUSION. The Board of Trustees has concluded that the proposed Plan of Reorganization to convert the Fund into a separate series of a Massachusetts business trust is in the best interest of the Fund's shareholders. The Trustees recommend that the Fund's shareholders vote FOR the approval of the Plan of Reorganization as described above. Such a vote encompasses approval of the reorganization of the Fund to a separate series of a Massachusetts business trust; temporary waiver of certain investment limitations of the Fund to permit the Reorganization (see "Temporary Waiver of Investment Restrictions" on page __); authorization of GSF, as sole shareholder of the Series, to approve (i) a Management Contract for the Series between the Trust and FMR, and (ii) a Distribution and Service Plan under Rule 12b-1, identical to the contract or Plan, as the case may be, in effect with the Fund immediately prior to the Closing Date (including as the Management Contract may be modified pursuant to a vote of shareholders of the fund as proposed in this Proxy Statement). If approved, the Plan of Reorganization will take effect on the Closing Date. If the Plan of Reorganization is not approved, the Fund will continue to operate as a fund of GSF. 3. TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT POLICY WHICH LIMITS ITS SECURITY INVESTMENTS TO U.S. GOVERNMENT SECURITIES WHOSE INTEREST IS EXEMPT FROM STATE AND LOCAL INCOME TAX. Currently, the fund maintains a fundamental investment policy specifying that the fund "limits its security investments to those U.S. Government securities and interests in U.S. Government securities whose interest is exempt from state and local income tax when held directly by taxpayers." The Trustees recommend that shareholders of the fund vote to eliminate the above fundamental investment policy. The fund's current fundamental policy does not permit the fund to invest in most U.S. agency securities such as Ginnie Maes and other mortgage securities. The primary purpose of the proposal is to provide the fund with increased flexibility to purchase additional U.S. agency securities. The expanded ability to invest in U.S. agency securities is consistent with the fund's current fundamental investment policy to invest "in securities issued by the U.S. Government or issued by U.S. Government agencies or instrumentalities, or in certain options and futures contracts," which will remain the same and cannot be changed without shareholder approval. If the proposal is approved by shareholders, the Trustees intend to adopt a non-fundamental limitation that could be changed without a vote of shareholders. The proposed non-fundamental limitation would limit the fund's investments in mortgage securities to 40% of its net assets. This non-fundamental policy is expected to become standard for Fidelity Government bond funds. Mortgage securities are subject to prepayment risk. Securities subject to prepayment risk generally offer less potential for gains during a declining interest rate environment, and similar or greater potential for loss in a rising interest rate environment. FMR will attempt to balance the potential increased risks from investing in mortgage securities or other agency securities with the potential gains available from such securities. As of _______1997, __% of the fund is invested in U.S. Treasury securities. CONCLUSION. The Board of Trustees has concluded that the proposal will benefit the fund and its shareholders. The Board of Trustees recommends voting FOR the proposal. Upon shareholder approval, the changes will become effective when the disclosure is revised to reflect the changes. If the proposal is not approved, the fund's current fundamental policy will remain unchanged. 4. TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT LIMITATION CONCERNING REAL ESTATE. The fund's fundamental investment limitation concerning real estate currently states: "The fund may not purchase or sell real estate, but this shall not prevent the fund from investing in marketable securities issued by companies such as real estate investment trusts which deal in real estate or interests therein." The Trustees recommend that shareholders of the fund vote to replace this fundamental investment limitation with the following fundamental investment limitation governing purchases and sales of real estate. "The fund may not purchase or sell real estate unless acquired as a result of ownership of securities or other instruments (but this shall not prevent the fund from investing in securities or other instruments backed by real estate or securities of companies engaged in the real estate business)." The primary purpose of the proposed amendment is to clarify the types of securities in which the fund is authorized to invest and to conform the fund's fundamental real estate limitation to a limitation that is expected to become standard for all funds managed by FMR. (See "Adoption of Standardized Investment Limitations" on page __.) If the proposal is approved, the new fundamental real estate limitation may not be changed without the approval of shareholders. Adoption of the proposed limitation concerning real estate is not expected to significantly affect the way in which the fund is managed, the investment performance of the fund, or the securities or instruments in which the fund invests. However, to the extent that the fund invests to a greater extent in real estate related securities, it will be subject to the risks of the real estate market. This industry is sensitive to factors such as changes in real estate values and property taxes, overbuilding, variations in rental income, and interest rates. Performance could also be affected by the structure, cash flow, and management skill of real estate companies. The fund does not expect to acquire real estate. However, the proposed limitation would clarify several points. First, the proposed limitation would make explicit that the fund may acquire a security or other instrument that is secured by a mortgage or other right to foreclose on real estate, in the event of a default. Second, the proposed limitation would clarify the fact that the fund may invest without limitation in securities issued or guaranteed by companies engaged in acquiring, constructing, financing, developing, or operating real estate projects (e.g., securities of issuers that develop various industrial, commercial, or residential real estate projects such as factories, office buildings, or apartments). Any investments in these securities or other instruments are, of course, subject to the fund's investment objective and policies and to other limitations regarding diversification and concentration in particular industries. Also, the proposed limitation specifically permits the fund to sell real estate acquired as a result of ownership of securities or other instruments. However, in light of the types of securities in which the fund regularly invests, FMR considers this to be a remote possibility. The proposed limitation covers all types of real estate-related investments, while the current limitation refers to "marketable" securities. Any unmarketable investments will continue to be limited to 10% of net assets by the fund's existing non-fundamental limitation. CONCLUSION. The Board of Trustees has concluded that the proposal will benefit the fund and its shareholders. The Trustees recommend voting FOR the proposal. Upon shareholder approval, the changes will become effective when the disclosure is revised to reflect the changes. If the proposal is not approved by the shareholders of the fund, the fund's current limitation will remain unchanged. 5. TO ADOPT A NEW FUNDAMENTAL INVESTMENT POLICY FOR THE FUND PERMITTING THE FUND TO INVEST ALL OF ITS ASSETS IN ANOTHER OPEN-END INVESTMENT COMPANY WITH SUBSTANTIALLY THE SAME INVESTMENT OBJECTIVE AND POLICIES. The Board of Trustees has approved, and recommends that shareholders of the fund approve, the adoption of a new fundamental investment policy that would permit the fund to invest all of its assets in another open-end investment company with substantially the same investment objective and policies ("Master Feeder Fund Structure"). The purpose of the Master Feeder Fund Structure would be to achieve operational efficiencies by consolidating portfolio management while maintaining different distribution and servicing structures. BACKGROUND. A number of mutual funds have developed so called "master-feeder" fund structures under which several "feeder" funds invest all of their assets in a single "master" fund. This proposal would add a fundamental policy for the fund that permits a Master Feeder Fund Structure. REASON FOR THE PROPOSAL. FMR and the Board of Trustees continually review methods of structuring mutual funds to take advantage of potential efficiencies. While neither the Board nor FMR has determined that the fund should invest in a Master Fund, the Trustees believe it could be in the best interests of the fund to adopt such a structure at a future date. At present, certain of the fund's fundamental investment policies and limitations would prevent the fund from investing all of its assets in another investment company, and would require a vote of shareholders before such a structure could be adopted. To avoid the costs associated with a subsequent shareholder meeting, the Trustees recommend that shareholders vote to permit the fund's assets to be invested in a single Master Fund, without a further vote of shareholders. The Trustees will authorize such an investment only if they determine that action to be in the best interests of the fund and its shareholders and if, upon advice of counsel, they determine that the investment will not have material adverse tax consequences to the fund. If shareholders approve this proposal, certain fundamental and non-fundamental policies and limitations of the fund that currently prohibit investment in shares of one investment company would not apply to permit the investment in a Master Fund managed by FMR or its affiliates or successor. These policies include the fund's limitations on concentration limit, diversification limit and underwriting limit. DISCUSSION. FMR may manage a number of mutual funds with similar investment objectives, policies, and limitations but with different features and services (Comparable Funds). Were these Comparable Funds to pool their assets, operational efficiencies could be achieved, offering the opportunity to reduce costs. Similarly, FMR anticipates that a Master Feeder Fund Structure would facilitate the introduction of new Fidelity mutual funds, increasing the investment options available to shareholders. The fund's method of operation and shareholder services would not be materially affected by its investment in a Master Fund, except that the assets of the fund would be managed as part of a larger pool. Were the fund to invest all of its assets in a Master Fund, it would hold only a single investment security, and the Master Fund would directly invest in individual securities pursuant to its investment objective. The Master Fund would be managed by FMR or an affiliate, such as FMR Texas, Inc. in the case of a money market fund. The Trustees would retain the right to withdraw the fund's investments from a Master Fund at any time and would do so if the Master Fund's investment objective and policies were no longer appropriate for the fund. The fund would then resume investing directly in individual securities as it does currently. Whenever a Feeder Fund is asked to vote at a shareholder meeting of the Master Fund, the Feeder Fund will hold a meeting of its shareholders if required by applicable law or the Feeder Fund's policies to vote on the matters to be considered at the Master Fund shareholder meeting. The fund will cast its votes at the Master Fund meeting in the same proportion as the fund's shareholders voted at their meeting. At present, the Trustees have not considered any specific proposal to authorize pooling of assets. The Trustees will authorize investing the fund's assets in a Master Fund only if they determine that pooling is in the best interests of the fund and if, upon advice of counsel, they determine that the investment will not have material adverse tax consequences to the fund or its shareholders. In determining whether to invest in a Master Fund, the Trustees will consider, among other things, the opportunity to reduce costs and to achieve operational efficiencies. The Trustees will not authorize investment in a Master Fund if doing so would materially increase costs (including fees) to shareholders. FMR may benefit from the use of a Master Feeder Fund Structure if overall assets under management are increased (since FMR's fees are based on assets). Also, FMR's expenses of providing investment and other services to the fund may be reduced. If the fund's investment in a Master Fund were to reduce FMR's expenses materially, the Trustees would consider whether a reduction in FMR's management fee would be appropriate if and when a Master Feeder Fund Structure is implemented. PROPOSED FUNDAMENTAL POLICY. To allow the fund to invest in a Master Fund at a future date, the Trustees recommend that the fund adopt the following fundamental policy: "The fund may, notwithstanding any other fundamental investment policy or limitation, invest all of its assets in the securities of a single open-end management investment company managed by Fidelity Management & Research Company or an affiliate or successor with substantially the same fundamental investment objective, policies, and limitations as the fund." If the proposal is adopted, the Trustees intend to adopt a non-fundamental investment limitation for the fund which states: "The fund does not currently intend to invest all of its assets in the securities of a single open-end management investment company managed by Fidelity Management & Research Company or an affiliate or successor with substantially the same fundamental investment objective, policies, and limitations as the fund." CONCLUSION. The Board of Trustees has concluded that the proposal will benefit the fund and its shareholders. The Trustees recommend voting FOR the proposal. Upon shareholder approval, the changes will become effective when the disclosure is revised to reflect the changes. If the proposal is not approved by the shareholders of the fund, the fund's current fundamental investment policies will remain unchanged with respect to potential investment in Master Funds. ADOPTION OF STANDARDIZED INVESTMENT LIMITATIONS The primary purpose of Proposals 6 through 14 is to revise several of the fund's investment limitations to conform to limitations which are standard for similar types of funds managed by FMR. The Board of Trustees asked FMR to analyze the various fundamental and non-fundamental investment limitations of the Fidelity funds, and, where practical and appropriate to a fund's investment objective and policies, propose to shareholders adoption of standard fundamental limitations and elimination of certain other fundamental limitations. Generally, when fundamental limitations are eliminated, Fidelity's standard non-fundamental limitations replace them. By making these limitations non-fundamental, the Board of Trustees may amend a limitation as they deem appropriate, without seeking shareholder approval. The Board of Trustees would amend the limitations to respond, for instance, to developments in the marketplace, or changes in federal or state law. The costs of shareholder meetings called for these purposes are generally borne by a fund and its shareholders. It is not anticipated that these proposals will substantially affect the way the fund is currently managed. However, FMR is presenting them to you for your approval because FMR believes that increased standardization will help to promote operational efficiencies and facilitate monitoring of compliance with fundamental and non-fundamental investment limitations. Although adoption of a new or revised limitation is not likely to have any impact on the current investment techniques employed by the fund, it will contribute to the overall objectives of standardization. 6. TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT LIMITATION CONCERNING THE ISSUANCE OF SENIOR SECURITIES. The fund's current fundamental investment limitation regarding the issuance of senior securities states: "The fund may not issue senior securities." The Trustees recommend that shareholders vote to replace this limitation with the following fundamental investment limitation governing the issuance of senior securities: "The fund may not issue senior securities, except as permitted under the Investment Company Act of 1940." The primary purpose of the proposal is to revise the fund's fundamental senior securities limitation to conform to a limitation that is expected to become standard for all funds managed by FMR. (See "Adoption of Standardized Investment Limitations" on page _.) If the proposal is approved, the new fundamental senior securities limitation cannot be changed without the approval of shareholders. Adoption of the proposed limitation on senior securities is not expected to affect the way in which the fund is managed, the investment performance of the fund, or the securities or instruments in which the fund invests. However, the proposed limitation clarifies that the fund may issue senior securities to the extent permitted under the 1940 Act. Although the definition of a "senior security" involves complex statutory and regulatory concepts, a senior security is generally thought of as an obligation of a fund which has a claim to the fund's assets or earnings that takes precedence over the claims of the fund's shareholders. The 1940 Act generally prohibits mutual funds from issuing senior securities; however, mutual funds are permitted to engage in certain types of transactions that might be considered "senior securities" as long as certain conditions are satisfied. For example, a transaction which obligates a fund to pay money at a future date (e.g., the purchase of securities for settlement on a date that is further away than the normal settlement period) may be considered a "senior security." A mutual fund, however, is permitted to enter into this type of transaction if it maintains a segregated account containing liquid securities in an amount equal to its obligation to pay cash for the securities at a future date. The fund utilizes transactions that may be considered "senior securities" only in accordance with applicable regulatory requirements under the 1940 Act. CONCLUSION. The Board of Trustees has concluded that the proposal will benefit the fund and its shareholders. The Trustees recommend voting FOR the proposal. Upon shareholder approval, the changes will become effective when the disclosure is revised to reflect the changes. If the proposal is not approved by the shareholders of the fund, the fund's current limitation will remain unchanged. 7. TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATION CONCERNING SHORT SALES OF SECURITIES. The Fund's current fundamental investment limitation on selling securities short is as follows: "The fund may not make short sales of securities; provided, however, that the fund may purchase or sell futures contracts, and may make initial and variation margin payments in connection with purchases or sales of futures contracts or of options on futures contracts." The Trustees recommend that shareholders of the fund vote to eliminate the above fundamental investment limitation. If the proposal is approved by shareholders, the Trustees intend to adopt a non-fundamental limitation that could be changed without a vote of shareholders. The proposed non-fundamental limitation is set forth below, with a brief analysis of the substantive difference between it and the current limitation. "The fund does not currently intend to sell securities short, unless it owns or has the right to obtain securities equivalent in kind and amount to the securities sold short, and provided that transactions in futures contracts and options are not deemed to constitute selling securities short." In a short sale, an investor sells a borrowed security and has a corresponding obligation to the lender to return the identical security. In an investment technique known as a short sale "against the box," an investor sells securities short while owning the same securities in the same amount, or having the right to obtain equivalent securities. The investor could have the right to obtain equivalent securities, for example, through its ownership of warrants, options, or convertible bonds. The proposed non-fundamental limitation would clarify that transactions in futures contracts and options are not deemed to constitute selling securities short. The fund does not currently anticipate entering into any short sales other than short sales against the box. If the proposal is approved, however, the Board of Trustees would be able to change the proposed non-fundamental limitation in the future, without a vote of shareholders subject to appropriate disclosure to investors. Elimination of the fund's fundamental limitation on short selling is unlikely to affect the fund's investment techniques at this time. The Board of Trustees believes that efforts to standardize the fund's investment limitation will facilitate FMR's investment compliance efforts (see "Adoption of Standardized Investment Limitations" on page __) and are in the best interests of shareholders. CONCLUSION. The Board of Trustees has concluded that the proposal will benefit the fund and its shareholders. The Trustees recommend voting FOR the proposal. Upon shareholder approval, the changes will become effective when the disclosure is revised to reflect the changes. If the proposal is not approved by the shareholders of the fund, the fund's current limitation will remain unchanged. 8. TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATION CONCERNING MARGIN PURCHASES. The fund's current fundamental investment limitation concerning purchasing securities on margin is as follows: "The fund may not purchase any securities on margin except for such short-term credits as are necessary for the clearance of transactions; provided, however, that the fund may purchase or sell futures contracts, and may make initial and variation margin payments in connection with purchases or sales of futures contracts or of options on futures contracts." The Trustees recommend that shareholders of the fund vote to eliminate the above fundamental investment limitation. If the proposal is approved, the Trustees intend to adopt a substantially identical non-fundamental limitation for the fund that could be changed without the approval of shareholders. Margin purchases involve the purchase of securities with money borrowed from a broker. "Margin" is the cash or eligible securities that the borrower places with a broker as collateral against the loan. The fund's current fundamental limitation prohibits the fund from purchasing securities on margin, except to obtain such short-term credits as may be necessary for the clearance of transactions and for initial and variation margin payments made in connection with the purchase and sale of futures contracts and options on futures contracts. With these exceptions, mutual funds are prohibited from entering into most types of margin purchases by applicable SEC policies. The proposed non-fundamental limitation includes these exceptions. If the proposal is approved by shareholders, the Trustees intend to adopt the following non-fundamental investment limitation, which would prohibit margin purchases except as permitted under the conditions referred to above: "The fund does not currently intend to purchase securities on margin, except that the fund may obtain such short-term credits as are necessary for the clearance of transactions, and provided that margin payments in connection with futures contracts and options on futures contracts shall not constitute purchasing securities on margin." Although elimination of the fund's fundamental limitation on margin purchases is unlikely to affect the fund's investment techniques at this time, in the event of a change in federal regulatory requirements, the fund may alter its investment practices in the future. The Board of Trustees believes that efforts to standardize investment limitations will facilitate FMR's investment compliance efforts (see "Adoption of Standardized Investment Limitations" on page __) and are in the best interests of shareholders. CONCLUSION. The Board of Trustees has concluded that the proposal will benefit the fund and its shareholders. The Trustees recommend voting FOR the proposal. Upon shareholder approval, the changes will become effective when the disclosure is revised to reflect the changes. If the proposal is not approved by the shareholders of the fund, the fund's current limitation will remain unchanged. 9. TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT LIMITATION CONCERNING BORROWING. The fund's current fundamental investment limitation concerning borrowing states: "The fund may not borrow money, except that the fund may borrow money for temporary or emergency purposes (not for leveraging or investment) in an amount not exceeding 33 1/3% of the value of its total assets (including the amount borrowed) less liabilities (other than borrowings). Any borrowings that come to exceed 33 1/3% of the fund's total assets by reason of decline in net assets will be reduced within 3 days to the extent necessary to comply with the 33 1/3% limitation." The Trustees recommend that shareholders of the fund vote to replace the fund's current fundamental investment limitation with the following amended fundamental investment limitation governing borrowing: "The fund may not borrow money, except that the fund may borrow money for temporary or emergency purposes (not for leveraging or investment) in an amount not exceeding 33 1/3% of its total assets (including the amount borrowed) less liabilities (other than borrowings). Any borrowings that come to exceed this amount will be reduced within three days (not including Sundays and holidays) to the extent necessary to comply with the 33 1/3% limitation." The primary purpose of the proposal is to revise the fund's fundamental borrowing limitation to conform to a limitation that is expected to become standard for all funds managed by FMR. (See "Adoption of Standardized Investment Limitations" on page __.) If the proposal is approved, the amended fundamental borrowing limitation cannot be changed without the approval of shareholders. Adoption of the proposed fundamental limitation concerning borrowing is not expected to affect the way in which the fund is managed, the investment performance of the fund, or the securities or instruments in which the fund invests. However, the proposed fundamental limitation would clarify two points. First, under the proposed limitation, the fund must reduce borrowings that come to exceed 33 1/3% of its total assets for any reason. While under the current limitation, the fund must reduce borrowings that come to exceed 33 1/3% of total assets only when there is a decline in net assets. Second, the proposed limitation specifically defines "three days" to exclude Sundays and holidays. CONCLUSION. The Board of Trustees has concluded that the proposal will benefit the fund and its shareholders. The Trustees recommend voting FOR the proposal. Upon shareholder approval, the changes will become effective when the disclosure is revised to reflect the changes. If the proposal is not approved by the shareholders of the fund, the fund's current limitation will remain unchanged. 10. TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT LIMITATION CONCERNING UNDERWRITING. The fund's current fundamental investment limitation concerning underwriting states: "The fund may not underwrite any issue of securities, except to the extent that the fund may be deemed to be an underwriter within the meaning of the Securities Act of 1933 (i) in the disposition of restricted securities or (ii) in connection with the purchase of government securities directly from the issuer in accordance with the fund's investment objective, policies, and limitations." The Trustees recommend that shareholders of the fund vote to replace this limitation with the following fundamental limitation governing underwriting: "The fund may not underwrite securities issued by others, except to the extent that the fund may be considered an underwriter within the meaning of the Securities Act of 1933 in the disposition of restricted securities." The primary purpose of the proposed amendment is to clarify the fund's fundamental policy with respect to underwriting. The proposed limitation maintains that the fund may not underwrite securities, but clarifies that the fund may only be considered an underwriter, under federal securities laws, in the disposition of restricted securities. The proposal also serves to conform the fund's fundamental investment limitation concerning underwriting to a limitation which is expected to become standard for all funds managed by FMR. (See "Adoption of Standardized Investment Limitations" on page __.) If the proposal is approved, the new limitation may not be changed without the approval of shareholders. Adoption of the proposed limitation concerning underwriting is not expected to affect the way in which the fund is managed, the investment performance of the fund, or the securities or instruments in which the fund invests. CONCLUSION. The Board of Trustees has concluded that the proposal will benefit the fund and its shareholders. The Trustees recommend voting FOR the proposal. Upon shareholder approval, the changes will become effective when the disclosure is revised to reflect the changes. If the proposal is not approved by the shareholders of the fund, the fund's current limitation will remain unchanged. 11. TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT LIMITATION CONCERNING THE CONCENTRATION OF ITS INVESTMENTS IN A SINGLE INDUSTRY. The fund's current fundamental investment limitation concerning the concentration of its investments within a single industry states: "The fund may not purchase the securities of any issuer (other than obligations issued or guaranteed as to principal and interest by the Government of the United States or its agencies or instrumentalities, or commitments to acquire such securities on a "when-issued" basis) if, as a result thereof, more than 25% of the fund's total assets (taken at current value) would be invested in the securities of one or more issuers having their principal business activities in the same industry." The Trustees recommend that shareholders of the fund vote to replace this fundamental investment limitation with the following amended fundamental investment limitation governing concentration: "The fund may not purchase the securities of any issuer (other than securities issued or guaranteed by the U.S. Government or any of its agencies or instrumentalities) if, as a result, more than 25% of the fund's total assets would be invested in the securities of companies whose principal business activities are in the same industry." The primary purpose of the proposal is to revise the fund's fundamental concentration limitation to conform to a limitation which is expected to become standard for all funds managed by FMR. (See "Adoption of Standardized Investment Limitations" on page __.) If the proposal is approved, the new fundamental concentration limitation could not be changed without the approval of shareholders. Adoption of the proposed amended limitation on concentration is not expected to affect the way the fund is managed, the investment performance of the fund, or the securities or instruments in which the fund invests. [The fund will continue to invest in commitments to acquire securities issued or guaranteed by the U.S. Government or any of its agencies or instrumentalities on a "when-issued basis."] The proposed amended limitation is not substantially different from the current policy and is not likely to have any impact on the investment techniques employed by the fund. CONCLUSION. The Board of Trustees has concluded that the proposal will benefit the fund and its shareholders. The Trustees recommend voting FOR the proposal. Upon shareholder approval, the changes will become effective when the disclosure is revised to reflect the changes. If the proposal is not approved by the shareholders of the fund, the fund's current limitation will remain unchanged. 12. TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATION CONCERNING INVESTMENTS IN OTHER INVESTMENT COMPANIES. The fund's current fundamental investment limitation concerning investments in other investment companies states: "The fund may not purchase securities of other investment companies except in the open market where no commission except the ordinary broker's commission is paid, or as a part of a merger or consolidation, and in no event may investments in such securities exceed 10% of the total assets of the fund. It may not purchase or retain securities issued by other open-end investment companies." The Trustees recommend that shareholders of the fund vote to eliminate the above fundamental limitation. The ability of mutual funds to invest in other investment companies is restricted by the 1940 Act, and, until recently, by some state regulations. The fund's fundamental restriction incorporates some of the 1940 Act restrictions and the state regulations. The federal 1940 Act restrictions will remain applicable to the fund whether or not they are recited in a fundamental limitation. Because the state regulations are no longer applicable and federal requirements apply whether or not the fund has a fundamental policy, shareholder approval is sought to eliminate this fundamental limitation. Elimination of the limitation would permit the fund to purchase the securities of other investment companies to the extent permitted under the 1940 Act, or an exemption granted by the SEC. Under the 1940 Act, a fund may purchase the securities of other investment companies if immediately thereafter not more than (i) 3% of the total outstanding voting stock of such company is owned by the fund, (ii) 5% of the fund's total assets, taken at market value, would be invested in any one such company, or (iii) 10% of the fund's total assets, taken at market value, would be invested in such securities. In addition, a fund may not acquire shares of a closed-end investment company if, immediately thereafter, the fund, together with other investment companies having the same investment adviser and companies controlled by such companies, would own more than 10% of the total outstanding stock of such closed-end investment company. Under certain conditions, investment in the securities of an investment company that is part of the same group of investment companies is not subject to the foregoing limits. If the proposal is approved, the fund would also be able to enhance its cash management by investing in the Central Funds. Pursuant to an order of exemption granted by the SEC, the fund may invest up to 25% of total assets in the Central Funds, which are non-publicly offered money market or short-term bond funds managed by FMR or an affiliate of FMR. The Central Funds do not currently pay investment advisory, management, or transfer agent fees, but do pay minimal fees for services, such as custodian, auditor, and Independent Trustee fees. FMR anticipates that the Central Funds will benefit the fund by enhancing the efficiency of cash management for the Fidelity funds and by providing increased short-term investment opportunities. Furthermore, adoption of the proposal would allow the fund to change its policies with respect to the purchase of securities of other investment companies, if federal requirements change, without the cost of a shareholder vote. In addition, the Board of Trustees believes that efforts to standardize the fund's investment limitations will facilitate FMR's investment compliance efforts. (See "Adoption of Standardized Investment Limitations" on page __.) Elimination of the fundamental restriction is not expected to have an impact on the fund's current investment practices, except with respect to cash management as discussed above. CONCLUSION. The Board of Trustees has concluded that the proposal will benefit the fund and its shareholders. The Trustees recommend voting FOR the proposal. Upon shareholder approval, the changes will become effective when the disclosure is revised to reflect the changes. If the proposal is not approved, the fund's current limitation will remain unchanged. 13. TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATION CONCERNING INVESTING IN OIL, GAS, OR OTHER MINERAL EXPLORATION OR DEVELOPMENT PROGRAMS. Currently, the fund maintains a fundamental investment limitation specifying that the fund may not "invest in oil, gas, or other mineral exploration or development programs." Investment in oil, gas, or other mineral exploration programs is not prohibited under federal standards for mutual funds but was prohibited by some state regulations. Because these state law regulations are no longer applicable, the Trustees recommend that shareholders of the fund vote to eliminate the above fundamental investment limitation. Elimination of the fundamental limitation will not change the fund's fundamental investment objective or requirements. The fund's objective of investing in securities issued by the U.S. Government or issued by U.S. Government agencies or instrumentalities, prohibits investment in oil, gas and other mineral exploration programs. As a result, elimination of the fundamental restriction will have no impact on the fund's investment practices. In addition, the Board of Trustees believes that efforts to standardize the fund's investment limitation will facilitate FMR's compliance efforts. (See "Adoption of Standardized Investment Limitations" on page __.) CONCLUSION. The Board of Trustees has concluded that the proposal will benefit the fund and its shareholders. The Trustees recommend voting FOR the proposal. Upon shareholder approval, the changes will become effective when the disclosure is revised to reflect the changes. If the proposal is not approved by the shareholders of the fund, the fund's current limitation will remain unchanged. 14. TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATION CONCERNING PURCHASING WARRANTS. Currently, the fund maintains a fundamental investment limitation specifying that the fund may not "purchase warrants, valued at the lower of cost or market, in excess of 5% of the value of the fund's net assets." Purchasing warrants in excess of 5% of the value of the fund's net assets is not prohibited under federal standards for mutual funds but was prohibited by some state regulations. Because these state law regulations are no longer applicable, the Trustees recommend that shareholders of the fund vote to eliminate the above fundamental investment limitation. Eliminating of the fundamental limitation will not change the fund's fundamental investment objective or requirements. The fund's objective of investing in securities issued by the U.S. Government or issued by U.S. Government agencies or instrumentalities, prohibits purchasing warrants. As a result, elimination of the fundamental restriction will have no impact on the fund's investment practices. In addition, the Board of Trustees believes that efforts to standardize the fund's investment limitation will facilitate FMR's compliance efforts. (See "Adoption of Standardized Investment Limitations" on page __.) CONCLUSION. The Board of Trustees has concluded that the proposal will benefit the fund and its shareholders. The Trustees recommend voting FOR the proposal. Upon shareholder approval, the changes will become effective when the disclosure is revised to reflect the changes. If the proposal is not approved by the shareholders of the fund, the fund's current limitation will remain unchanged. OTHER BUSINESS The Board knows of no other business to be brought before the Meeting. However, if any other matters properly come before the Meeting, it is the intention that proxies that do not contain specific instructions to the contrary will be voted on such matters in accordance with the judgment of the persons therein designated. PRESENT MANAGEMENT CONTRACT The fund employs FMR to furnish investment advisory and other services. Under its management contract with the fund, FMR acts as investment adviser and, subject to the supervision of the Board of Trustees, directs the investments of the fund in accordance with its investment objective, policies, and limitations. FMR also provides the fund with all necessary office facilities and personnel for servicing the fund's investments, compensates all officers of the fund and all Trustees who are "interested persons" of the trust or of FMR, and all personnel of the fund or FMR performing services relating to research, statistical, and investment activities. In addition, FMR or its affiliates, subject to the supervision of the Board of Trustees, provide the management and administrative services necessary for the operation of the fund. These services include providing facilities for maintaining the fund's organization; supervising relations with custodians, transfer and pricing agents, accountants, underwriters, and other persons dealing with the fund; preparing all general shareholder communications and conducting shareholder relations; maintaining the fund's records and the registration of the fund's shares under federal and state laws; developing management and shareholder services for the fund; and furnishing reports, evaluations, and analyses on a variety of subjects to the Trustees. Services provided by affiliates of FMR will continue under the proposed management contract described in proposal 1. In addition to the management fee payable to FMR, the fund pays transfer agent and pricing and bookkeeping fees to Fidelity Service Company, Inc. (FSC), an affiliate of FMR, its transfer, dividend disbursing, and shareholder servicing agent. Although the fund's current management contract provides that the fund will pay for typesetting, printing, and mailing prospectuses, statements of additional information, notices, and reports to shareholders, the trust, on behalf of the fund has entered into a revised transfer agent agreement with FSC, pursuant to which FSC bears the costs of providing these services to existing shareholders. Other expenses paid by the fund include interest, taxes, brokerage commissions, and the fund's proportionate share of insurance premiums and Investment Company Institute dues. The fund is also liable for such non-recurring expenses as may arise, including costs of any litigation to which the fund may be a party, and any obligation it may have to indemnify its officers and Trustees with respect to litigation. Transfer agent fees and pricing and bookkeeping fees, including reimbursement for out-of-pocket expenses, paid to FSC by the fund for fiscal 1996 amounted to $2,524,241. The fund also has a distribution agreement with FDC, a Massachusetts corporation organized on July 18, 1960. FDC is a broker-dealer registered under the Securities Exchange Act of 1934 and is a member of the National Association of Securities Dealers, Inc. The distribution agreement calls for FDC to use all reasonable efforts, consistent with its other business, to secure purchasers for shares of the fund, which are continuously offered at net asset value per share. Promotional and administrative expenses in connection with the offer and sale of shares are paid by FMR. FMR is the fund's manager pursuant to a management contract dated December 31, 1991, which was approved by Fidelity Government Securities Fund (a limited partnership) on December 31, 1991, as the then sole shareholder of the fund pursuant to an Agreement and Plan of Reorganization approved by public shareholders of the limited partnership on November 13, 1991. The fund was originally organized as a limited partnership in the State of Nebraska on August 25, 1978. On December 31, 1991, the limited partnership transferred all of its assets to the Massachusetts business trust. For the services of FMR under the contract, the fund pays FMR a monthly management fee composed of the sum of two elements: a group fee rate and an individual fund fee rate. The group fee rate is based on the monthly average net assets of all of the registered investment companies with which FMR has management contracts and is calculated on a cumulative basis pursuant to the graduated fee rate schedule shown below on the left. The schedule below on the right shows the effective annual group fee rate at various asset levels, which is the result of cumulatively applying the annualized rates on the left. For example, the effective annual fee rate at $522 billion of group net assets - - the approximate level for July 1997 - was .1387%, which is the weighted average of the respective fee rates for each level of group net assets up to $528 billion. GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES Average Annualized Group Effective Group Rate Net Annual Assets Assets Fee Rate $0 - 3 billion .3700% $ 0.5 .3700% billion 3 - 6 .3400 25 .2664 6 - 9 .3100 50 .2188 9 - 12 .2800 75 .1986 12 - 15 .2500 100 .1869 15 - 18 .2200 125 .1793 18 - 21 .2000 150 .1736 21 - 24 .1900 175 .1695 24 - 30 .1800 200 .1658 30 - 36 .1750 225 .1629 36 - 42 .1700 250 .1604 42 - 48 .1650 275 .1583 48 - 66 .1600 300 .1565 66 - 84 .1550 325 .1548 84 - 120 .1500 350 .1533 120 - 174 .1450 400 .1507 174 - 228 .1400 228 - 282 .1375 282 - 336 .1350 Over 336 .1325 Under the fund's current management contract with FMR, the group fee rate is based on a schedule with breakpoints ending at .1500% for average group assets in excess of $84 billion. The group fee rate breakpoints shown above for average group assets in excess of $120 billion and under $228 billion were voluntarily adopted by FMR on January 1, 1992. The additional breakpoints shown above for average group assets in excess of $228 billion were voluntarily adopted by FMR on November 1, 1993. On August 1, 1994, FMR voluntarily revised the prior extensions to the group fee rate schedule, and added new breakpoints for average group assets in excess of $156 billion and under $372 billion as shown in the schedule below, pending shareholder approval of a new management contract reflecting the revised schedule. The revised group fee rate schedule provides for lower management fee rates as FMR's assets under management increase. The revised group fee rate schedule was identical to the above schedule for average group assets under $156 billion. On January 1, 1996, FMR voluntarily added new breakpoints to the revised schedule for average group assets in excess of $372 billion, pending shareholder approval of a new management contract reflecting the revised schedule and additional breakpoints. The revised group fee rate schedule and its extensions provide for lower management fee rates as FMR's assets under management increase. For average group assets in excess of $156 billion, the revised group fee rate schedule with additional breakpoints voluntarily adopted by FMR is as follows: GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES Average Group Annualized Group Net Effective Assets Rate Assets Annual Fee Rate $120 - 156 billion .1450% $ 150 billion .1736% 156 - 192 .1400 175 .1690 192 - 228 .1350 200 .1652 228 - 264 .1300 225 .1618 264 - 300 .1275 250 .1587 300 - 336 .1250 275 .1560 336 - 372 .1225 300 .1536 372 - 408 .1200 325 .1514 408 - 444 .1175 350 .1494 444 - 480 .1150 375 .1476 480 - 516 .1125 400 .1459 Over 516 .1100 425 .1443 450 .1427 475 .1413 500 .1399 525 .1385 550 .1372 The individual fund fee rate is .30%. Based on the average group net assets of the funds advised by FMR for July 1997, the annual management fee rate would be calculated as follows: Group Fee Rate Individual Fund Management Fee Fee Rate Rate .1387% + .30% = .4387% One-twelfth of this annual rate is applied to the fund's net assets averaged for the month, giving a dollar amount, which is the fee for that month. During fiscal 1996, FMR received $4,286,520 for its services as investment adviser to the fund. This fee was equivalent to 0.45% of the average net assets of the fund. FMR may, from time to time, voluntarily reimburse all or a portion of the fund's operating expenses (exclusive of interest, taxes, brokerage commissions, and extraordinary expenses). FMR retains the ability to be repaid for these expense reimbursements in the amount that expenses fall below the limit prior to the end of the fiscal year. Expense reimbursements by FMR will increase the fund's total returns and yield and repayment of the reimbursement by the fund will lower its total returns and yield. ACTIVITIES AND MANAGEMENT OF FMR FMR, a corporation organized in 1946, serves as investment adviser to a number of investment companies. Information concerning the advisory fees, net assets, and total expenses of funds with investment objectives similar to Fidelity Government Securities Fund and advised by FMR is contained in the Table of Average Net Assets and Expense Ratios in Exhibit 3 beginning on page __. FMR, its officers and directors, its affiliated companies, and the Trustees, from time to time have transactions with various banks, including the custodian banks for certain of the funds advised by FMR. Those transactions that have occurred to date have included mortgages and personal and general business loans. In the judgment of FMR, the terms and conditions of those transactions were not influenced by existing or potential custodial or other fund relationships. The Directors of FMR are Edward C. Johnson 3d, Chairman of the Board and of the Executive Committee; Robert C. Pozen, President; and Peter S. Lynch, Vice Chairman. With the exception of Robert C. Pozen, each of the Directors is also a Trustee of the trust. Messrs. Johnson 3d, Pozen, Burkhead, John H. Costello, Arthur S. Loring, Richard A. Silver, Leonard M. Rush, Fred L. Henning, Jr., Dwight D. Churchill and Curt Hollingsworth are currently officers of the trust and officers or employees of FMR or FMR Corp. With the exception of Mr. Costello, Mr. Silver, Mr. Rush, and ______, all of these persons hold or have options to acquire stock of FMR Corp. The principal business address of each of the Directors of FMR is 82 Devonshire Street, Boston, Massachusetts 02109. All of the stock of FMR is owned by its parent company, FMR Corp., 82 Devonshire Street, Boston, Massachusetts 02109, which was organized on October 31, 1972. Members of Mr. Edward C. Johnson 3d's family are the predominant owners of a class of shares of common stock, representing approximately 49% of the voting power of FMR Corp., and, therefore, under the 1940 Act may be deemed to form a controlling group with respect to FMR Corp. During the period October 1, 1996 through July 31, 1997, [the following transactions/no transactions] were entered into by Trustees and nominees as Trustee of the trust involving more than 1% of the voting common, non-voting common and equivalent stock, or preferred stock of FMR Corp. PORTFOLIO TRANSACTIONS All orders for the purchase or sale of portfolio securities are placed on behalf of the fund by FMR pursuant to authority contained in the fund's management contract. FMR may place agency transactions with National Financial Services Corporation (NFSC) and Fidelity Brokerage Services (FBS), indirect subsidiaries of FMR Corp., if the commissions are fair, reasonable, and comparable to commissions charged by non-affiliated, qualified brokerage firms for similar services. For fiscal year 1996 the fund paid no brokerage commissions to affiliated brokers. SUBMISSION OF CERTAIN SHAREHOLDER PROPOSALS The trust does not hold annual shareholder meetings. Shareholders wishing to submit proposals for inclusion in a proxy statement for a subsequent shareholder meeting should send their written proposals to the Secretary of the Trust, 82 Devonshire Street, Boston, Massachusetts 02109. NOTICE TO BANKS, BROKER-DEALERS AND VOTING TRUSTEES AND THEIR NOMINEES Please advise the trust, in care of Fidelity Service Company, Inc., whether other persons are beneficial owners of shares for which proxies are being solicited and, if so, the number of copies of the Proxy Statement and Annual Reports you wish to receive in order to supply copies to the beneficial owners of the respective shares. EXHIBIT 1 The language to be added to the current contract is in ((double parentheses)); the language to be deleted is set forth in [brackets]. FORM OF MANAGEMENT CONTRACT between FIDELITY GOVERNMENT SECURITIES FUND and FIDELITY MANAGEMENT & RESEARCH COMPANY AGREEMENT ((AMENDED and RESTATED)) as of [made] this [31st] ((__)) day of [December 1991] ((___)) 1997, by and between Fidelity Government Securities Fund, a Massachusetts business trust ((which may issue one or more series of shares of beneficial interest)) (hereinafter called the "Fund"), on behalf of its single existing series of shares of beneficial interest (hereinafter called the "Portfolio"), and Fidelity Management & Research Company, a Massachusetts corporation (hereinafter called the "Adviser") ((as set forth in its entirety below.)) ((Required authorization and approval by shareholders and Trustees having been obtained, the Fund, on behalf of the Portfolio, and the Adviser hereby consent, pursuant to Paragraph 6 of the existing Management Contract dated December 31, 1991, to a modification of said Contract in the manner set forth below. The Amended Management Contract shall, when executed by duly authorized officers of the Fund and Adviser, take effect on December 1, 1997 or the first day of the month following approval.)) 1. (a) Investment Advisory Services. The Adviser undertakes to act as investment adviser of the Portfolio and shall, subject to the supervision of the Fund's Board of Trustees, direct the investments of the Portfolio in accordance with the investment objective, policies and limitations as provided in the [Fund's] ((Portfolio's)) Prospectus or other governing instruments, as amended from time to time, the Investment Company Act of 1940 and rules thereunder, as amended from time to time (the "1940 Act"), and such other limitations as the [Fund] ((Portfolio)) may impose by notice in writing to the Adviser. The Adviser shall also furnish for the use of the [Fund] ((Portfolio)) office space and all necessary office facilities, equipment and personnel for servicing the investments of the [Fund] ((Portfolio)); and shall pay the salaries and fees of all officers of the Fund, of all Trustees of the Fund who are "interested persons" of the Fund or of the Adviser and of all personnel of the Fund or the Adviser performing services relating to research, statistical and investment activities. The Adviser is authorized, in its discretion and without prior consultation with the [Fund] ((Portfolio)), to buy, sell, lend and otherwise trade in any stocks, bonds and other securities and investment instruments on behalf of the [Fund] ((Portfolio)). The investment policies and all other actions of the [Fund] ((Portfolio)) are and shall at all times be subject to the control and direction of the Fund's Board of Trustees. (b) Management Services. The Adviser shall perform (or arrange for the performance by its affiliates of) the management and administrative services necessary for the operation of the Fund. The Adviser shall, subject to the supervision of the Board of Trustees, perform various services for the [Fund] ((Portfolio)), including but not limited to: (i) providing the [Fund] ((Portfolio)) with office space, equipment and facilities (which may be its own) for maintaining its organization; (ii) on behalf of the [Fund] ((Portfolio,)) supervising relations with, and monitoring the performance of, custodians, depositories, transfer and pricing agents, accountants, attorneys, underwriters, brokers and dealers, insurers and other persons in any capacity deemed to be necessary or desirable; (iii) preparing all general shareholder communications, including shareholder reports; (iv) conducting shareholder relations; (v) maintaining the Fund's existence and its records; (vi) during such times as shares are publicly offered, maintaining the registration and qualification of the Portfolio's shares under federal and state law; and (vii) investigating the development of and developing and implementing, if appropriate, management and shareholder services designed to enhance the value or convenience of the [Fund] ((Portfolio)) as an investment vehicle. The Adviser shall also furnish such reports, evaluations, information or analyses to the Fund as the Fund's Board of Trustees may request from time to time or as the Adviser may deem to be desirable. The Adviser shall make recommendations to the Fund's Board of Trustees with respect to Fund policies, and shall carry out such policies as are adopted by the Trustees. The Adviser shall, subject to review by the Board of Trustees, furnish such other services as the Adviser shall from time to time determine to be necessary or useful to perform its obligations under this Contract. (c) ((The Adviser shall place all orders for the purchase and sale of portfolio securities for the Portfolio's account with brokers or dealers selected by the Adviser, which may include brokers or dealers affiliated with the Adviser. The Adviser shall use its best efforts to seek to execute portfolio transactions at prices which are advantageous to the Portfolio and at commission rates which are reasonable in relation to the benefits received. In selecting brokers or dealers qualified to execute a particular transaction, brokers or dealers may be selected who also provide brokerage and research services (as those terms are defined in Section 28(e) of the Securities Exchange Act of 1934) to the Portfolio and/or the other accounts over which the Adviser or its affiliates exercise investment discretion. The Adviser is authorized to pay a broker or dealer who provides such brokerage and research services a commission for executing a portfolio transaction for the Portfolio which is in excess of the amount of commission another broker or dealer would have charged for effecting that transaction if the Adviser determines in good faith that such amount of commission is reasonable in relation to the value of the brokerage and research services provided by such broker or dealer. This determination may be viewed in terms of either that particular transaction or the overall responsibilities which the Adviser and its affiliates have with respect to accounts over which they exercise investment discretion. The Trustees of the Fund shall periodically review the commissions paid by the Portfolio to determine if the commissions paid over representative periods of time were reasonable in relation to the benefits to the Portfolio.)) The Adviser shall, in acting hereunder, be an independent contractor. The Adviser shall not be an agent of the [Fund] ((Portfolio)). 2. It is understood that the Trustees, officers and shareholders of the Fund are or may be or become interested in the Adviser as directors, officers or otherwise and that directors, officers and stockholders of the Adviser are or may be or become similarly interested in the Fund, and that the Adviser may be or become interested in the Fund as a shareholder or otherwise. 3. The Adviser will be compensated on the following basis for the services and facilities to be furnished hereunder. The Adviser shall receive a monthly management fee, payable monthly as soon as practicable after the last day of each month, composed of a [group fee] ((Group Fee)) [rate] and an [individual fund fee] ((Individual Fund Fee)) [rate]. (a) Group Fee Rate. The [group fee rate] ((Group Fee Rate)) shall be based upon the monthly average of the net assets of the registered investment companies having Advisory and Service or Management Contracts with the Adviser (computed in the manner set forth in the [charter of each investment company] ((fund's Declaration of Trust or other organizational document)) determined as of the close of business on each business day throughout the month. The [group fee rate] ((Group Fee Rate)) shall be determined on a cumulative basis pursuant to the following schedule: Average Net Assets Annualized Fee Rate (for each level) [Up to] 0 - $ 3 billion .3700% 3 - 6 .3400 6 - 9 .3100 9 - 12 .2800 12 - 15 .2500 15 - 18 .2200 18 - 21 .2000 21 - 24 .1900 24 - 30 .1800 30 - 36 .1750 36 - 42 .1700 42 - 48 .1650 48 - 66 .1600 66 - 84 .1550 [Over - 84] [.150] ((84 - 120)) ((.1500)) ((120 - 156)) ((.1450)) ((156 - 192)) ((.1400)) ((192 - 228)) ((.1350)) ((228 - 264)) ((.1300)) ((264 - 300)) ((.1275)) ((300 - 336)) ((.1250)) ((336 - 372)) ((.1225)) ((372 - 408)) ((.1200)) ((408 - 444)) ((.1175)) ((444 - 480)) ((.1150)) ((480 - 516)) ((.1125)) ((Over 516)) ((.1100)) (b) Individual Fund Fee Rate. The Individual Fund Fee Rate shall be 0.30%. The sum of the [group fee rate] ((Group Fee Rate)), calculated as described above to the nearest millionth, ((and)) the [individual fund fee rate] ((Individual Fund Fee Rate)) shall constitute the [annual management fee rate] ((Annual Management Fee Rate.)) One-twelfth of the [annual management fee] ((Annual Management Fee Rate)) shall be applied to the average of the net assets of the [Fund] ((Portfolio)) (computed in the manner set forth in the ((Fund's)) Declaration of Trust [of the Fund] ((or other organizational document)) determined as of the close of [each] business [day] ((on each business day)) throughout the month. (c) ((In case of termination of this Contract during any month, the fee for that month shall be reduced proportionately on the basis of the number of business days during which it is in effect, and the fee computed upon the average net assets for the business days it is so in effect for that month.)) 4. It is understood that the [Fund] ((Portfolio)) will pay all its expenses, which expenses payable by the [Fund] ((Portfolio)) shall include, without limitation, (i) interest and taxes; (ii) brokerage commissions and other costs in connection with the purchase or sale of securities and other investment instruments; (iii) fees and expenses of the Fund's Trustees other than those who are "interested persons" of the Fund or the Adviser; (iv) legal and audit expenses; (v) custodian, registrar and transfer agent fees and expenses; (vi) fees and expenses related to the registration and qualification of the Fund and [its] ((the Portfolio's)) shares for distribution under state and federal securities laws; (vii) expenses of printing and mailing reports and notices and proxy material to shareholders of the [Fund] ((Portfolio)); (viii) all other expenses incidental to holding meetings of the [Fund's] ((Portfolio's)) shareholders, including proxy solicitations therefore; (ix) a pro rata share, based on relative net assets of the [Fund] ((Portfolio)) and other registered investment companies having Advisory and Service or Management Contracts with the Adviser, of 50% of insurance premiums for fidelity and other coverage; (x) its proportionate share of association membership dues; (xi) expenses of typesetting for printing Prospectuses and Statements of Additional Information and supplements thereto; (xii) expenses of printing and mailing Prospectuses and Statements of Additional Information and supplements thereto sent to existing shareholders; and (xiii) such non-recurring or extraordinary expenses as may arise, including those relating to actions, suits or proceedings to which the Portfolio is a party and the legal obligation which the [Fund] ((Portfolio)) may have to indemnify the Fund's Trustees and officers with respect thereto. 5. The services of the Adviser to the [Fund] ((Portfolio)) are not to be deemed exclusive, the Adviser being free to render services to others and engage in other activities, provided, however, that such other services and activities do not, during the term of this Contract, interfere, in a material manner, with the Adviser's ability to meet all of its obligations with respect to rendering services to the [Fund] ((Portfolio)) hereunder. In the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of obligations or duties hereunder on the part of the Adviser, the Adviser shall not be subject to liability to the [Fund] ((Portfolio)) or to any shareholder of the [Fund] ((Portfolio)) for any act or omission in the course of, or connected with, rendering services hereunder or for any losses that may be sustained in the purchase, holding or sale of any security or other investment instrument. 6. (a) Subject to prior termination as provided in sub-paragraph (d) of this paragraph 6, this Contract shall continue in force until [May 31, 1992] ((June 30, 1998)) and indefinitely thereafter, but only so long as the continuance after such date shall be specifically approved at least annually by vote of the Trustees of the Fund or by vote of a majority of the outstanding voting securities of the [Fund] ((Portfolio)). (b) This Contract may be modified by mutual consent, such consent on the part of the Fund to be authorized by vote of a majority of the outstanding voting securities of the [Fund] ((Portfolio)). (c) In addition to the requirements of sub-paragraphs (a) and (b) of this paragraph 6, the terms of any continuance or modification of this Contract must have been approved by the vote of a majority of those Trustees of the Fund who are not parties to the Contract or interested persons of any such party, cast in person at a meeting called for the purpose of voting on such approval. (d) Either party hereto may, at any time on sixty (60) days' prior written notice to the other, terminate this Contract, without payment of any penalty, by action of its Trustees or Board of Directors, as the case may be, or with respect to the [Fund] ((Portfolio)) by vote of a majority of the outstanding voting securities ((of the Portfolio)). This Contract shall terminate automatically in the event of its assignment. 7. The Adviser is hereby expressly put on notice of the limitation of shareholder liability as set forth in the Fund's Declaration of Trust ((or other organizational document)) and agrees that the obligations assumed by the Fund pursuant to this Contract shall be limited in all cases to the [Fund] ((Portfolio)) and its assets, and the Adviser shall not seek satisfaction of any such obligation from the shareholders or any shareholder of the [Fund] ((Portfolio)) or any other Portfolios of the Fund. In addition, the Adviser shall not seek satisfaction of any such obligations from the Trustees or any individual Trustee. ((The Adviser understands that the rights and obligations of any Portfolio under the Declaration of Trust or other organizational document are separate and distinct from those of any and all other Portfolios.)) 8. ((This Agreement shall be governed by, and construed in accordance with, the laws of the Commonwealth of Massachusetts, without giving effect to the choice of laws provisions thereof.)) The terms "vote of a majority of the outstanding voting securities," "assignment," and "interested persons," when used herein, shall have the respective meanings specified in the 1940 Act, as now in effect or as hereafter amended, and subject to such orders as may be granted by the Securities and Exchange Commission. IN WITNESS WHEREOF the parties have caused this instrument to be signed in their behalf by their respective officers thereunto duly authorized, ((and their respective seals to be hereunto affixed)), all as of the date written above. [SIGNATURE LINES OMITTED] EXHIBIT 2 FORM OF AGREEMENT AND PLAN OF REORGANIZATION THIS AGREEMENT AND PLAN OF REORGANIZATION (the Agreement) is made as of the 19th day of June 1997 by and between Fidelity Government Securities Fund (the Fund), a separate series of Fidelity Government Securities Fund (GSF) and Fidelity Income Fund (the Trust), each a business trust duly formed under the laws of the Commonwealth of Massachusetts. This Agreement is intended to be, and is adopted as, a plan of reorganization within the meaning of Section 368(a)(1)(F) of the Internal Revenue Code of 1986, as amended (the Code). The reorganization will comprise: (a) the transfer of all of the assets of the Fund to a series of the Trust (the Series) solely in exchange for shares of beneficial interest in the Series (the Trust Series Shares) and the assumption by the Series of the Fund's liabilities; and (b) the constructive distribution of such Trust Series Shares by the Fund to its shareholders (Fund Shareholder) in complete liquidation and termination of the Fund in exchange for all of the Fund's outstanding shares (Fund Shares). The Fund shall receive shares of the Series equal to the number of Fund Shares on the Closing Date (as defined below). Immediately thereafter, the Fund shall then distribute to each Fund Shareholder one Trust Series Share for each Fund Share held by the shareholder on the Closing Date. The foregoing transactions are referred to herein as the "Reorganization." In consideration of the mutual promises and subject to the terms and conditions herein, the parties covenant and agree as follows: 1. REPRESENTATIONS AND WARRANTIES OF THE FUND GSF on behalf of the Fund represents and warrants as follows: (a) The Fund is a series of GSF, a business trust duly formed, validly existing, and in good standing under the laws of the Commonwealth of Massachusetts and has the power to own all of its properties and assets and to carry out its obligations under this Agreement. It has all necessary federal, state, and local authorizations to carry out its business as now being conducted and to carry out this Agreement; (b) The Fund is duly registered as an open-end management investment company under the Investment Company Act of 1940 (the 1940 Act), as amended, or is a series of a registrant and such registration is in full force and effect; (c) The Fund is not in, and the execution, delivery and performance of this Agreement will not result in, violation of any provision of the Declaration of Trust or the Fund's Bylaws, or, to the Fund's knowledge, of any agreement, indenture, instrument, contract, lease or other undertaking to which the Fund is a party or by which the Fund is bound or result in the acceleration of any obligation or the imposition of any penalty under any agreement, judgment or decree to which the Fund is a party or is bound; (d) The Fund has no material contracts or other commitments (other than this Agreement) that will not be terminated without liability to the Fund on or prior to the Closing Date; (e) To the Fund's knowledge, no material legal, administrative, or other proceeding or investigation of, or before, any court or governmental body presently is pending or threatened against the Fund or any of its properties or assets which assert liability on the part of the Fund, except as previously disclosed in writing to the Trust. The Fund knows of no facts that might form the basis for the institution of such proceedings; (f) The Fund has filed or will file all federal and state tax returns which, to the knowledge of the Fund's officers, are required to be filed by the Fund and has paid or will pay all federal and state taxes shown to be due on said returns or provision shall have been made for the payment thereof, and, to the best of the Fund's knowledge, no such return is currently under audit and no assessment has been asserted with respect to such returns; (g) All of the issued and outstanding shares of the Fund are, and at the Closing Date will be, duly and validly issued and outstanding and fully paid and nonassessable as a matter of Massachusetts law (except as disclosed in the Fund's Statement of Additional Information), and have been offered for sale in conformity with all applicable federal securities laws. All of the issued and outstanding shares of the Fund will, at the Closing Date, be held by the persons and in the amounts as certified in accordance with the provisions of this Agreement; (h) The information to be furnished by the Fund for use in applications for orders, registration statements, proxy materials and other documents which may be necessary in connection with the transactions contemplated hereby shall be accurate and complete and shall comply in all material respects with federal securities and other laws and regulations thereunder applicable thereto; (i) At both the Valuation Time (as defined in Section 4) and the Closing Date (as defined in Section 6), the Fund will have the full right, power, and authority to sell, assign, transfer, and deliver its portfolio securities and any other assets of the Fund to be transferred to the Series pursuant to this Agreement. At the Closing Date, subject only to the delivery of the Fund's portfolio securities and any such other assets as contemplated by this Agreement, the Series will acquire the Fund's portfolio securities and any such other assets subject to no encumbrances, liens, or security interests (except for those that may arise in the ordinary course and are disclosed to the Series) and without any restrictions upon the transfer thereof; (j) The execution, delivery, and performance of this Agreement will have been duly authorized prior to the Closing Date by all necessary corporate action on the part of the Fund, and this Agreement constitutes a valid and binding obligation of the Fund enforceable in accordance with its terms, subject to shareholder approval; (k) To the best of the knowledge of the Fund's management, there is no plan or intention by the Fund's shareholders to sell, exchange or otherwise dispose of any of the Trust Series Shares to be received in the Reorganization; (l) The Fund shares are widely held and may be purchased and redeemed upon request; (m) No consideration other than Trust Series Shares will be issued in exchange for the Fund Shares in the Reorganization; (n) Immediately following consummation of the Reorganization, the Fund Shareholders will own all of the Trust Series Shares and will own such shares solely by reason of their ownership of the Fund Shares immediately prior to the Reorganization; (o) Immediately following the consummation of the Reorganization, the Trust will hold on behalf of the Series the same assets and be subject to the same liabilities that the Fund held or was subject to immediately prior thereto, except for assets used to pay expenses incurred in connection with the Reorganization. Assets used to pay expenses and all distributions (except for distributions and redemptions arising in the ordinary course of the Fund's business as an open-end investment company) made by the Fund immediately preceding the Reorganization will, in the aggregate, constitute less than __% of the net assets of the Fund; (p) At the time of the Reorganization, the Fund will not have outstanding any warrants, options, convertible securities, or any other type of right pursuant to which any person could acquire stock in the Fund; (q) There is no intercompany indebtedness between the Series and the Fund that was issued, acquired or that will be settled at a discount; (r) The Fund's liabilities to be assumed by the Series in the Reorganization were incurred by the Fund in the ordinary course of its business and are associated with the assets to be transferred; (s) The Fund's shareholders each will pay their own expenses, if any, incurred in connection with the Reorganization; (t) The fair market value of the Fund's assets to be transferred by the Fund to the Series will equal or exceed the Fund's liabilities to be assumed by the Series plus the liabilities to which the transferred assets are subject; (u) The Fund is a regulated investment company as defined in Section 851 of the Internal Revenue Code of 1986, as amended; (v) At the time of the Reorganization, the Fund is not under the jurisdiction of a court in a proceeding under Title 11 of the United States Code or similar case within the meaning of Section 368(a)(3)(A) of the Code; (w) To the Fund's knowledge, no consent, approval, authorization, or order of any court or governmental authority is required for the consummation by the Fund of the transactions contemplated by this Agreement, except such as have been obtained under the Securities Act of 1933 (the 1933 Act), the Securities Exchange Act of 1934 (the 1934 Act), and the 1940 Act; (x) The Fund has no known liabilities of a material nature, contingent or otherwise, other than those shown as belonging to it on its statement of assets and liabilities as of March 31, 1997 and those incurred in the ordinary course of the Fund's business as an investment company since March 31, 1997; and (y) The Fund will be liquidated immediately after the Reorganization. 2. REPRESENTATIONS AND WARRANTIES OF THE TRUST The Trust represents and warrants as follows: (a) The Trust is a business trust duly formed, validly existing, and in good standing under the laws of the Commonwealth of Massachusetts. It has all necessary federal, state, and local authorizations to carry out its business as now being conducted and to carry out this Agreement; (b) The Trust is duly registered as an open-end management investment company under the 1940 Act, and the Series is a duly established and designated series of the Trust; (c) The Trust is not in, and the execution, delivery and performance of this Agreement will not result in, violation of any provision of the Declaration of Trust or the Trust's Bylaws, or, to the Trust's knowledge, of any agreement, indenture, instrument, contract, lease or other undertaking to which the Trust is a party or by which the Trust is bound or result in the acceleration of any obligation or the imposition of any penalty under any agreement, judgment or decree to which the Trust is a party or is bound; (d) To the Trust's knowledge, no material legal, administrative, or other proceeding or investigation of, or before, any court or governmental body presently is pending or threatened against the Trust or any of its properties or assets which assert liability on the part of the Trust, except as previously disclosed in writing to the Trust. The Trust knows of no facts that might form the basis for the institution of such proceedings; (e) The Trust intends for the Series to be a regulated investment company, under Section 851 of the Code; (f) Prior to the Closing Date, there shall be no issued and outstanding Trust Series Shares or any other securities issued by the Series (except for the one share that may be issued to FMR); Trust Series Shares issued in connection with the transactions contemplated herein will be, duly and validly issued and outstanding, fully paid and non-assessable under Massachusetts law on the Closing Date; (g) The execution, delivery, and performance of this Agreement will have been duly authorized prior to the Closing Date by all necessary corporate action on the part of the Trust, and, upon its proper execution, this Agreement will constitute a valid and binding obligation of the Trust enforceable against the Series in accordance with its terms; (h) The Trust Series Shares at the Closing will have been duly authorized and, when so issued and delivered, will be duly and validly issued shares of the Series, fully paid and non-assessable under Massachusetts law except that under Massachusetts law, shareholders of a Massachusetts business trust, under certain circumstances, may be held personally liable for obligations of the Trust; (i) The fair market value of the Trust Series Shares to be received by the Fund Shareholders will be equal to the fair market value of their Fund Shares constructively surrendered in exchange therefor; (j) The Trust has no plan or intention on behalf of the Series to issue additional Trust Series Shares following the Reorganization except for issuance of shares arising in the ordinary course of the business of the Series as the series of an open-end investment company; (k) The Trust has no plan or intention to reacquire the Trust Series Shares issued to the Fund Shareholders pursuant to the Reorganization other than through redemptions arising in the ordinary course of the business of the Series as a series of an open-end investment company; (l) Following the Reorganization, the Trust, on behalf of the Series, will continue the Fund's historic business; (m) The Trust has no plan or intention to sell or otherwise dispose of any of the Fund's assets to be acquired by the Series in the Reorganization, except for dispositions made in the ordinary course of its business and dispositions necessary to maintain the status of the Series as a regulated investment company under Section 851 of the Code; (n) The information to be furnished by the Trust with respect to the Series for use in applications for orders, registration statements, proxy materials and other documents which may be necessary in connection with the transactions contemplated hereby shall be accurate and complete and shall comply in all material respects with federal securities and other laws and regulations applicable thereto; (o) The Trust, on behalf of the Series, shall use all reasonable efforts to obtain the approvals and authorizations required by the 1933 Act and the 1940 Act as it may deem appropriate in order to operate after the Closing Date; and (p) To the Trust's knowledge, no consent, approval, authorization, or order of any court or governmental authority is required for the consummation by the Series of the transactions contemplated by this Agreement, except such as have been obtained under the 1933 Act, the 1934 Act, and the 1940 Act. 3. REORGANIZATION (a) Subject to the requisite approval of the shareholders of the Fund and to the other terms and conditions contained herein, the Fund agrees to assign, convey, transfer, and deliver to the Series established by the Trust solely for the purpose of acquiring all of the assets of the Fund, which Series has not issued any Trust Series Shares (except for one share that may be issued to FMR) or commenced operations, on the Closing Date all of the assets of the Fund of any kind and nature existing on the Closing Date. The Series agrees in exchange therefore (1) to assume all of the Fund's liabilities existing on or after the Closing Date, whether or not determinable on the Closing Date, and (2) to issue and deliver to the Fund the number of full and fractional Trust Series Shares equal to the value and number of full and fractional shares of the Fund outstanding at the time of the closing, as described in paragraph 6, on the Closing Date provided for in Section 6(a). (b) The assets of the Fund to be acquired by the Series and allocated thereto shall include, without limitation, all cash, cash equivalents, securities, receivables (including interest or dividends receivables), claims, choses in action, and other property owned by the Fund, and any deferred or prepaid expenses shown as an asset on the books of the Fund on the Closing Date. The Fund will pay or cause to be paid to the Series any dividend or interest payments received by it on or after the Closing Date with respect to the assets transferred to the Series hereunder, and the Series will retain any dividend or interest payments received by it after the Valuation Time (as defined in Section 4) with respect to the assets transferred hereunder without regard to the payment date thereof. (c) Immediately upon delivery to the Fund of the Trust Series Shares, the individual Trustees of GSF or any officer duly authorized by them, on GSF's behalf as the then sole shareholder of the Series, shall (1) approve (i) a Management Contract between the Trust on behalf of the Series and FMR, (ii) a Distribution and Service Plan under Rule 12b-1 under the 1940 Act between the Trust on behalf of the Series and Fidelity Distributors Corporation (FDC) substantively identical to the plan and contracts currently in effect with the Fund immediately prior to the closing date (as defined below), except as to the parties to such plan or contract, and (iii) the independent accountants who currently serve in that capacity for the Fund, and (iv) the adoption of revised fundamental policies described in Proposals 4 through 14 of the Proxy Statement. The Management Contract may be modified pursuant to a vote of shareholders of the fund, as proposed in this Proxy Statement. (d) Pursuant to this Agreement, as soon after the Closing Date as is conveniently practicable (the Liquidation Date), the Fund will constructively distribute the Trust Series Shares pro rata in proportion to their respective shares of beneficial interest in the Fund to Fund Shareholders of record determined as of the Valuation Time on the Closing Date in accordance with the Fund's Declaration of Trust, in liquidation of such Fund. Such distribution will be accomplished by the Fund's transfer agent opening accounts on the share records of the Series in the names of such Fund Shareholders and transferring the Trust Series Shares thereto. Each Fund Shareholder's account shall be credited with the respective pro rata number of full and fractional (rounded to the third decimal place) Trust Series Shares due that shareholder. All outstanding Fund Shares, including any represented by certificates, shall simultaneously be canceled on the Fund's share transfer records. The Series shall not issue certificates representing Trust Series Shares in connection with such distribution. (e) Immediately after the distribution of the Trust Series Shares as set forth in Section 3(d), the Fund shall be liquidated and terminated and any such further actions shall be taken in connection therewith as required by applicable law. (f) Any transfer taxes payable upon issuance of Trust Series Shares in a name other than that of the registered holder on the Fund's books of the Fund Shares constructively exchanged for the Trust Series Shares shall be paid by the person to whom such Trust Series Shares are to be issued, as a condition of such transfer. (g) Any reporting responsibility of the Fund is and shall remain the responsibility of the Fund up to and including the date on which it is liquidated. 4. VALUATION (a) The valuation time shall be 4:00 p.m. Eastern time on the Closing Date (the Valuation Time). (b) The value of the Fund's net assets to be acquired by the Series hereunder shall be the net asset value computed as of the Valuation Time, using the valuation procedures set forth in the Fund's then current Prospectus and Statement of Additional Information. (c) The number, value, and denomination of full and fractional Trust Series Shares to be issued in exchange for the Fund's net assets shall be equal to the number, value, and denomination of full and fractional Fund Shares outstanding on the Closing Date. (d) All computations pursuant to this Section shall be made by FSC, a division of FMR Corp., in accordance with its regular practice as pricing agent for the Fund. 5. FEES; EXPENSES (a) The Trust and the Fund each represent that there is no person who dealt with it who by reason of such dealings is entitled to any broker's or finder's fees or commissions arising out of the transactions contemplated hereby. (b) The Fund shall be responsible for all expenses, fees and other charges, subject to FMR's voluntary expense limitation (2.5% of average net assets). 6. CLOSING DATE (a) The transfer of the Fund's assets in exchange for the assumption by the Series of the Fund's liabilities and the issuance of Trust Series Shares, as described above, together with related acts necessary to consummate the same, (the Closing), unless otherwise provided herein, shall occur at the principal office of GSF and the Trust, 82 Devonshire Street, Boston, Massachusetts, on November 29, 1997, or at such other place or date as the parties may agree in writing (the Closing Date). All acts taking place at the Closing shall be deemed to take place simultaneously as of the Valuation Time or at such other time and/or place as the parties may agree. (b) In the event that, on the Closing Date: (i) any of the markets for securities held by the Fund are closed to trading, or (ii) trading thereon is restricted, or (iii) trading or reporting of trading on said markets or elsewhere is disrupted, all so that accurate appraisal of the total net asset value of the Fund is impracticable, the Closing Date shall be postponed until the first business day after the day when such trading shall have been fully resumed and reporting shall have been restored, or such other date as the parties may agree. (c) The Fund shall deliver at the Closing a certificate of an authorized officer stating that it has notified The Bank of New York, as custodian for the Fund, of the Fund's reorganization to a series of the Trust. (d) Fidelity Service Company, Inc. as transfer agent for the Fund, shall deliver at the Closing a certificate as to the conversion on its books and records of each Fund Shareholder account to an account as a holder of Trust Series Shares. The Trust shall issue and deliver a confirmation to the Fund evidencing the Trust Series Shares to be credited on the Closing Date or provide evidence satisfactory to the Fund that such Trust Series Shares have been credited to the Fund's account on the books of the Trust. At the Closing, each party shall deliver to the other such bills of sale, checks, assignments, stock certificates, receipts or other documents as such other party or its counsel may reasonably request. 7. SHAREHOLDER MEETING AND TERMINATION OF THE FUND (a) The Fund agrees to call a meeting of its shareholders (the Shareholder's Meeting) to consider and act upon this Agreement and to take all other action necessary to obtain approval of the transactions contemplated hereby. (b) The Fund agrees that as soon as reasonably practicable after distribution of the Trust Series Shares, the Fund shall be liquidated and terminated as a series of GSF pursuant to its Declaration of Trust, any further actions shall be taken in connection therewith as required by applicable law, and on and after the Closing Date the Fund shall not conduct any business except in connection with its liquidation and termination. 8. CONDITIONS TO OBLIGATIONS OF THE TRUST The obligations of the Trust hereunder shall be subject to the following conditions: (a) That the Fund furnishes to the Trust a statement, dated as of the Closing Date, signed by an officer of GSF, certifying that as of the Valuation Time and the Closing Date all representations and warranties of the Fund made in this Agreement are true and correct in all material respects and that the Fund has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied at or prior to such dates; (b) That the Fund furnishes the Trust with copies of the resolutions, certified by an officer of GSF, evidencing the adoption of this Agreement and the approval of the transactions contemplated herein by the requisite vote of the holders of the outstanding shares of beneficial interest of the Fund; (c) That the Fund shall deliver to the Trust at the Closing a statement of its assets and liabilities, together with a certificate as to the aggregate asset value of the Fund's portfolio securities, all as of the Valuation Time, certified on the Fund's behalf by its Treasurer or Assistant Treasurer; (d) That the Fund's custodian shall deliver to the Trust a certificate identifying the assets of the Fund held by such custodian as of the Valuation Time on the Closing Date and stating that at the Valuation Time: (i) the assets held by the custodian will be transferred to the Series; (ii) the Fund's assets have been duly endorsed in proper form for transfer in such condition as to constitute good delivery thereof; and (iii) to the best of the custodian's knowledge, all necessary taxes in conjunction with the delivery of the assets, including all applicable federal and state stock transfer stamps, if any, have been paid or provision for payment has been made; (e) That the Fund's transfer agent shall deliver to the Trust at the Closing a certificate setting forth the number of shares of the Fund outstanding as of the Valuation Time and the name and address of each holder of record of any such shares and the number of shares held of record by each such shareholder; (f) That the Fund calls a Shareholder's Meeting to consider and act upon this Agreement and to take all other action necessary to obtain approval of the transactions contemplated hereby; (g) That the Fund delivers to the Trust a certificate of an officer of GSF, dated the Closing Date, that there has been no material adverse change in the Fund's financial position since September 30, 1997, other than changes in the market value of its portfolio securities, or changes due to net redemptions of its shares, dividends paid, or losses from operations; and (h) That all of the issued and outstanding shares of beneficial interest of the Fund shall have been offered for sale and sold in conformity with all applicable state securities laws and, to the extent that any audit of the records of the Fund or its transfer agent by the Trust or its agents shall have revealed otherwise, the Fund shall have taken all actions that in the opinion of the Trust are necessary to remedy any prior failure on the part of the Fund to have offered for sale and sold such shares in conformity with such laws. 9. CONDITIONS TO OBLIGATIONS OF THE FUND The obligations of the Fund hereunder shall be subject to the following conditions: (a) That the Trust shall have executed and delivered to the Fund an Assumption of Liabilities, certified by an officer of the Trust, dated as of the Closing Date pursuant to which Trust on behalf of the Series will assume all of the liabilities of the Fund existing at the Valuation Time in connection with the transactions contemplated by this Agreement; (b) That the Trust furnishes to the Fund a statement, dated as of the Closing Date, signed by an officer of Trust, certifying that as of the Valuation Time and the Closing Date all representations and warranties of the Series made in this Agreement are true and correct in all material respects, and the Trust has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied at or prior to such dates; and (c) That the Fund shall have received an opinion of Kirkpatrick & Lockhart LLP, counsel to the Fund and the Trust, to the effect that the Trust Series Shares are duly authorized and upon delivery to the Fund as provided in this Agreement will be validly issued and will be fully paid and nonassessable under Massachusetts law. 9. CONDITIONS TO OBLIGATIONS OF THE FUND AND THE TRUST (a) That this Agreement shall have been adopted and the transactions contemplated herein shall have been approved by the requisite vote of the holders of the outstanding shares of beneficial interest of the Fund; (b) That all consents of other parties and all other consents, orders, and permits of federal, state, and local regulatory authorities (including those of the Commission and of state blue sky and securities authorities, including "no action" positions of such federal or state authorities) deemed necessary by the Trust or the Fund to permit consummation, in all material respects, of the transactions contemplated hereby shall have been obtained, except where failure to obtain any such consent, order, or permit would not involve a risk of a material adverse effect on the assets or properties of the Trust or the Fund, provided that either party hereto may for itself waive any of such conditions; (c) That all proceedings taken by either the Fund or the Series in connection with the transactions contemplated by this Agreement and all documents incidental thereto shall be satisfactory in form and substance to it and its counsel, Kirkpatrick & Lockhart LLP; (d) That the Trust shall have taken all necessary action so that the Series shall be a series of a registered open-end investment company under the 1940 Act immediately after the closing. (e) That there shall not be any material litigation pending with respect to the matters contemplated by this Agreement; (f) That the Trust and the Fund shall have received an opinion of Kirkpatrick & Lockhart LLP satisfactory to the Trust and the Fund that for federal income tax purposes: (i) The Reorganization will be a reorganization under Section 368(a)(1)(F) of the Code, and the Fund and the Series will each be parties to the Reorganization under section 368(b) of the Code; (ii) No gain or loss will be recognized by the Fund upon the transfer of all of its assets to the Series in exchange solely for the Trust Series Shares and the assumption of the Fund's liabilities followed by the distribution of those the Trust Series Shares to the shareholders of the Fund in liquidation of the Fund; (iii) No gain or loss will be recognized by the Series on the receipt of the Fund's assets in exchange solely for the the Trust Series Shares and the assumption of the Fund's liabilities; (iv) The basis of the Fund's assets in the hands of the Series will be the same as the basis of such assets in the Fund's hands immediately prior to the Reorganization; (v) The Series' holding period in the assets to be received from the Fund will include the Fund's holding period in such assets; (vi) A Fund Shareholder will recognize no gain or loss on the exchange of his or her shares of beneficial interest in the Fund for the Trust Series Shares in the Reorganization; (vii) A Fund Shareholder's basis in the Trust Series Shares to be received by him or her will be the same as his or her basis in the Fund Shares exchanged therefor; (viii) A Fund Shareholder's holding period for his or her Trust Series Shares will include the holding period of the Fund Shares exchanged, provided that those Fund Shares were held as capital assets on the date of the Reorganization. Notwithstanding anything herein to the contrary, neither the Fund nor the Trust may waive the conditions set forth in this subsection 10(f). 11. COVENANTS OF THE FUND AND THE TRUST (a) The Fund covenants to operate its business in the ordinary course between the date hereof and the Closing Date, it being understood that such ordinary course of business will include the payment of customary dividends and distributions. (b) The Fund covenants that the Trust Series Shares are not being acquired for the purpose of making any distribution thereof, other than in accordance with the terms of this Agreement. (c) The Fund covenants that it will assist the Trust in obtaining such information as the Trust reasonably requests concerning the beneficial ownership of Fund Shares. (d) The Fund covenants that its liquidation and termination will be effected in the manner provided in its Declaration of Trust in accordance with applicable law and, after the Closing Date, the Fund will not conduct any business except in connection with its liquidation and termination. 12. TERMINATION; WAIVER (a) The Trust and the Fund may terminate this Agreement by mutual agreement. In addition, either the Trust or the Fund may at its option terminate this Agreement at or prior to the Closing Date because: (i) Of a material breach by the other of any representation, warranty, or agreement contained herein to be performed at or prior to the Closing Date; or (ii) A condition herein expressed to be precedent to the obligations of the terminating party has not been met and it reasonably appears that it will not or cannot be met. (b) In the event of any such termination, there shall be no liability for damages on the part of the Trust or the Fund, or their respective Trustees or officers. 13. SOLE AGREEMENT; AMENDMENTS; WAIVERS; SURVIVAL OF WARRANTIES (a). This Agreement supersedes all previous correspondence and oral communications between the parties regarding the subject matter hereof, constitutes the only understanding with respect to such subject matter, may not be changed except by a letter of agreement signed by each party hereto and shall be construed in accordance with and governed by the laws of the Commonwealth of Massachusetts. (b) This Agreement may be amended, modified, or supplemented in such manner as may be mutually agreed upon in writing by the respective President, any Vice President, or Treasurer of the Series or the Fund; provided, however, that following the shareholders' meeting called by the Fund pursuant to Section 7 of this Agreement, no such amendment may have the effect of changing the provisions for determining the number of the Series Shares to be received by the Fund shareholders under this Agreement to the detriment of such shareholders without their further approval. (c) Either Fund may waive any condition to its obligations hereunder, provided that such waiver does not have any material adverse effect on the interests of such Fund's shareholders. The representations, warranties, and covenants contained in the Agreement, or in any document delivered pursuant hereto or in connection herewith, shall survive the consummation of the transactions contemplated hereunder. 14. DECLARATIONS OF TRUST A copy of the Declaration of Trust of the Trust and GSF, as restated, is on file with the Secretary of State of the Commonwealth of Massachusetts, and notice is hereby given that this instrument is executed on behalf of the Trustees of the Trust and GSF as trustees and not individually and that the obligations of the Fund and the Series under this instrument are not binding upon any of such Fund's or Trust's Trustees, officers, or shareholders individually but are binding only upon the assets and property of such Fund or Series. The Fund and the Trust each agrees that its obligations hereunder apply only to such Fund and the Series, respectively, and not to its shareholders individually or to the Trustees of such Fund or Series. 15. ASSIGNMENT. This Agreement shall bind and inure to the benefit of the parties hereto and their respective successors and assigns, but no assignment or transfer of any rights or obligations hereunder shall be made by any party without the written consent of the other party. Nothing herein expressed or implied is intended or shall be construed to confer upon or give any person, firm, or corporation other than the parties hereto and their respective successors and assigns any rights or remedies under or by reason of this Agreement. This Agreement may be executed in any number of counterparts, each of which, when executed and delivered, shall be deemed to be an original. IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed by its duly authorized officer. [SIGNATURE LINES OMITTED] EXHIBIT 3 [TABLE WILL BE UPDATED IN A SUBSEQUENT FILING] FUNDS ADVISED BY FMR - TABLE OF AVERAGE NET ASSETS AND EXPENSE RATIOS (A)
INVESTMENT FISCAL AVERAGE RATIO OF NET OBJECTIVE AND FUND YEAR END (A) NET ASSETS ADVISORY FEES (MILLIONS)(B) TO AVERAGE NET ASSETS PAID TO FMR (C) TAXABLE BOND The North Carolina Capital Management Trust: Term Portfolio 6/30/96 $ 63.5 0.38% Advisor Mortgage Securities: Class A ((hollow diamond)) 7/31/97** 0.1 0.45 Class T ((hollow diamond)) 7/31/97** 0.2 0.45 Class B ((hollow diamond)) 7/31/97** 0.1 0.45 Institutional Class ((hollow diamond)) 7/31/97** 0.6 0.45 Initial Class 7/31/96 470.6 0.45 Ginnie Mae ((pound)) 7/31/96 790.3 0.45 Spartan Limited Maturity Government ((pound)) 7/31/96 799.0 0.63* Target Timeline Funds: ((pound)) 1999 7/31/96** 8.6 -(dagger)* 2001 7/31/96** 7.3 -(dagger)* 2003 7/31/96** 9.6 -(dagger)* Spartan Ginnie Mae 8/31/96 436.4 0.63* Government Securities 9/30/96 960.0 0.45 Short-Intermediate Government 9/30/96 129.3 0.45 Spartan Investment Grade Bond ((pound)) 9/30/96 305.8 0.65 Spartan Short-Term Bond ((pound)) 9/30/96 429.5 0.65 Advisor Government Investment: Class A 10/31/96** 0.2 0.45 Class T 10/31/96 229.1 0.45 Class B 10/31/96 14.9 0.45 Institutional Class 10/31/96 24.6 0.45 Advisor High Yield: ((pound)) Class A 10/31/96** 1.9 0.60 Class T 10/31/96 1,446.6 0.60 Class B 10/31/96 249.2 0.60 Institutional Class 10/31/96 15.5 0.60 Advisor Short Fixed Income: ((pound)) Class A 10/31/96** 0.1 0.45 Class T 10/31/96 483.2 0.45 Institutional Class 10/31/96 10.5 0.45 Advisor Intermediate Bond: ((pound)) Class A 11/30/96** 0.4 0.45 Class T 11/30/96 254.8 0.45 Class B 11/30/96 18.2 0.45 Institutional Class 11/30/96 214.9 0.45 Institutional Short-Intermediate Government 11/30/96 341.6 0.42* Real Estate High Income 11/30/96 76.3 0.75 Advisor Emerging Markets Income: ((rex-all)) Class A 12/31/96** 0.3 0.69 Class T 12/31/96 55.3 0.69 Class B 12/31/96 13.1 0.69 Institutional Class 12/31/96 1.9 0.69 Advisor Strategic Income: ((rex-all)) Class A 12/31/96** $ 0.3 0.59% Class T 12/31/96 74.3 0.59 Class B 12/31/96 30.4 0.59 Institutional Class 12/31/96 3.1 0.59 Global Bond ((sigma)) 12/31/96 146.4 0.70 New Markets Income ((rex-all)) 12/31/96 221.9 0.69 Real Estate High Income II 12/31/96** 29.3 0.74(dagger) Variable Insurance Products Fund: High Income ((pound)) 12/31/96 1,248.1 0.59 Variable Insurance Products Fund II: Investment Grade Bond 12/31/96 203.1 0.45 Variable Insurance Products Fund III: Government Investment 12/31/96 17.9 0.44 High Yield ((pound)) 12/31/96 67.0 0.59 U.S. Bond Index 2/28/97 515.2 0.03* Capital & Income ((pound)) 4/30/97 2,173.2 0.61 Intermediate Bond ((pound)) 4/30/97 3,007.7 0.44 Investment Grade Bond ((pound)) 4/30/97 1,418.2 0.44 Short-Term Bond ((pound)) 4/30/97 986.3 0.44 Spartan Government Income 4/30/97 275.3 0.60* Spartan High Income ((pound)) 4/30/97 1,634.2 0.80 Spartan Short-Intermediate Government 4/30/97 73.0 0.65
(a) All fund data are as of the fiscal year end noted in the chart or as of April 30, 1997, if fiscal year end figures are not yet available. (b) Average net assets are computed on the basis of average net assets of each fund at the close of business on each business day throughout its fiscal period. (c) Reflects reductions for any expense reimbursement paid by or due from FMR pursuant to voluntary or state expense limitations. Funds so affected are indicated by an (*). (dagger) Annualized ** Less than a complete fiscal year ((rex-all)) Fidelity Management & Research Company has entered into sub-advisory agreements with the following affiliates: Fidelity Management & Research (U.K.) Inc. (FMR U.K.), Fidelity Management & Research (Far East) Inc. (FMR Far East), Fidelity Investments Japan Ltd. (FIJ), Fidelity International Investment Advisors (FIIA), and Fidelity International Investment Advisors (U.K.) Limited (FIIAL U.K.), with respect to the fund. ((sigma)) Fidelity Management & Research Company has entered into sub-advisory agreements with the following affiliates: FMR U.K., FMR Far East, FIIA, and FIIAL U.K., with respect to the fund. ((pound)) Fidelity Management & Research Company has entered into sub-advisory agreements with FMR U.K. and FMR Far East, with respect to the fund. ((hollow diamond)) The ratio of net advisory fees to average net assets paid to FMR represents the amount as of the prior fiscal year end. Updated ratios will be presented for each class of shares of the fund when the next fiscal year end figures are available. _____________ cusip #316172105/fund #054 Vote this proxy card TODAY! Your prompt response will save Fidelity Government Securities Fund the expense of additional mailings. Return the proxy card in the enclosed envelope or mail to: FIDELITY INVESTMENTS Proxy Department P.O. Box 9107 Hingham, MA 02043-9848 PLEASE DETACH AT PERFORATION BEFORE MAILING. - -------------------------------------------------------------------------- - -------------------- FIDELITY GOVERNMENT SECURITIES FUND: FIDELITY GOVERNMENT SECURITIES FUND PROXY SOLICITED BY THE TRUSTEES The undersigned, revoking previous proxies, hereby appoint(s) Edward C. Johnson 3d, Arthur S. Loring, and Ralph F. Cox or any one or more of them, attorneys, with full power of substitution, to vote all shares of Fidelity Government Securities Fund which the undersigned is entitled to vote at the Special Meeting of Shareholders of the fund to be held at the office of the trust at 82 Devonshire St., Boston, MA 02109, on November 19, 1997 at 1:15p.m. and at any adjournments thereof. All powers may be exercised by a majority of said proxy holders or substitutes voting or acting or, if only one votes and acts, then by that one. This Proxy shall be voted on the proposals described in the Proxy Statement as specified on the reverse side. Receipt of the Notice of the Meeting and the accompanying Proxy Statement is hereby acknowledged. NOTE: Please sign exactly as your name appears on this Proxy. When signing in a fiduciary capacity, such as executor, administrator, trustee, attorney, guardian, etc., please so indicate. Corporate and partnership proxies should be signed by an authorized person indicating the person's title. Date _____________, 1997 _______________________________________ _______________________________________ Signature(s) (Title(s), if applicable) PLEASE SIGN, DATE, AND RETURN PROMPTLY IN ENCLOSED ENVELOPE CUSIP #316172105/FUND #054 Please refer to the Proxy Statement discussion of each of these matters. IF NO SPECIFICATION IS MADE, THE PROXY SHALL BE VOTED FOR THE PROPOSALS. As to any other matter, said attorneys shall vote in accordance with their best judgment. THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR EACH OF THE FOLLOWING: __________________________________________________________________________ ___________________
1. To approve an amended management contract for the FOR [ ] AGAINST [ ] ABSTAIN [ ] 1. fund. 2. To approve an Agreement and Plan providing for the FOR [ ] AGAINST [ ] ABSTAIN [ ] 2. reorganization of the fund from a separate series of one Massachusetts business trust to another. 3. To eliminate the fund's fundamental investment policy FOR [ ] AGAINST [ ] ABSTAIN [ ] 3. which limits its security investments to U.S. Government securities whose interest is exempt from state and local income tax. 4. To amend the fund's fundamental investment FOR [ ] AGAINST [ ] ABSTAIN [ ] 4. limitation concerning real estate. 5. To adopt a new fundamental investment policy for the FOR [ ] AGAINST [ ] ABSTAIN [ ] 5. fund permitting the fund to invest all of its assets in another open-end investment company with substantially the same investment objective and policies. 6. To amend the fund's fundamental investment FOR [ ] AGAINST [ ] ABSTAIN [ ] 6. limitation concerning the issuance of senior securities. 7. To eliminate the fund's fundamental investment FOR [ ] AGAINST [ ] ABSTAIN [ ] 7. limitation concerning short sales of securities. 8. To eliminate the fund's fundamental investment FOR [ ] AGAINST [ ] ABSTAIN [ ] 8. limitation concerning margin purchases. 9. To amend the fund's fundamental investment FOR [ ] AGAINST [ ] ABSTAIN [ ] 9. limitation concerning borrowing. 10. To amend the fund's fundamental investment FOR [ ] AGAINST [ ] ABSTAIN [ ] 10. limitation concerning underwriting. 11. To amend the fund's fundamental investment FOR [ ] AGAINST [ ] ABSTAIN [ ] 11. limitation concerning the concentration of its investments in a single industry. 12. To eliminate the fund's fundamental investment FOR [ ] AGAINST [ ] ABSTAIN [ ] 12. limitation concerning investments in other investment companies. 13. To eliminate the fund's fundamental investment FOR [ ] AGAINST [ ] ABSTAIN [ ] 13. limitation concerning investing in oil, gas, or other mineral exploration or development programs. 14. To eliminate the fund's fundamental investment FOR [ ] AGAINST [ ] ABSTAIN [ ] 14. limitation concerning purchasing warrants.
GOV-PXC-0997 CUSIP #316172105/FUND #054 -----END PRIVACY-ENHANCED MESSAGE-----